NEW YORK, June 6, 2017 /PRNewswire/ -- S&P Global Ratings' decision to place BAM's rating on CreditWatch Negative represents a departure from their stated criteria and previous communications to the market. BAM's managing directors said they intend to engage with S&P during the CreditWatch period to demonstrate that BAM's financial strength and low-risk, low-volatility strategy of insuring only U.S. municipal bonds from essential public purpose issuers supports BAM's current rating.
BAM Chairman Bob Cochran said:
"Maintaining durable ratings has been the most important consideration for every operating decision we've made in the five years since BAM's launch, and we will continue to prioritize that during this CreditWatch period. We have provided additional information to S&P that we expect them to consider between now and the annual review of BAM's rating, and we will take the time between now and then to educate the rating committee about the strength inherent in our capital base, municipal-only business model, and pristine insured portfolio. BAM has never incurred an insured loss in its lifetime, and does not anticipate any losses from its existing insured portfolio."
BAM Chief Executive Officer Seán McCarthy said:
"BAM is fulfilling the mission we set out when the company was launched: Providing the market with the ability to choose a guarantor with robust and growing capital strength that is exposed only to municipal risk. Our portfolio strategy does not limit BAM's competitive position: Only 3% or less of the U.S. insured municipal market is sold in sectors that BAM does not insure, and diversification outside the municipal market has historically exposed bond insurers to excessive risk of loss. According to municipal market default studies by Moody's and S&P, 70% of the defaults by credits that were rated investment grade at issuance were from the sectors BAM has chosen not to insure. In contrast to the industry's past, we will not change our risk tolerance in response to rating agency pressure."
In its 2016 Annual Report, S&P set the following benchmarks for BAM's performance, and BAM has achieved each one:
In addition, since inception, S&P Global Ratings has repeatedly cited the value of BAM's municipal-only underwriting strategy:
BAM Chairman Bob Cochran concluded:
"BAM has clearly satisfied S&P's criteria and expectations and BAM's financial performance has been gaining momentum through the past five quarters. In the current quarter, we are the market leader, guaranteeing 45% of the par insured and more than 50% of all insured transactions. We will continue to explain those facts to S&P during the CreditWatch period, and encourage everyone in the market who values a municipal-only guarantor to join us."
About Build America Mutual
BAM is a mutual bond insurance company operated for the benefit of its members ? the cities, states and other municipal entities that use BAM's financial guaranty to lower their cost of borrowing. BAM is sponsored by the National League of Cities.
Through June 2, 2017, BAM has insured more than $39 billion of municipal securities for more than 2,400 municipal issuers nationwide. Learn more at http://buildamerica.com/mission/.
For more information, please contact:
Michael Stanton, Head of Corporate Strategy and Communications
212-235-2575; [email protected]
SOURCE Build America Mutual
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