Assured Guaranty and Orrick, Herrington & Sutcliffe LLP held onto their top spots in the municipal bond insurance and bond counsel league tables in 2016, a year that set a record for long-term muni volume.
Assured kept first place among bond insurers, as it has since 2009, insuring $14.23 billion in 902 transactions, though its share of the insured market slipped to 56.1% from 63% in 2015, according to data from Thomson Reuters. Orrick finished 2016 as legal counsel on a par amount of $40.44 billion in 454 transactions, compared with $37.54 billion in 391 transactions in 2015, even as its market share slipped to 9.6% from 10%.
"2016 was an excellent year for public finance generally, and it was an excellent year for Orrick," said Justin Cooper, partner and co-chair of public finance practice for the firm. "With three new partners, we are building for the long-term. We want to be shock-resistant. I am more bullish than most on 2017. Our underlying infrastructure needs are still growing, and public finance will be part of the solution."
Municipal bond insurance penetration dipped in 2016 to 5.70%, from 2015's 6.34%, which was the highest since 2009, when 8.64% of the market was insured. The drop this year did not come as a surprise, as the Federal Reserve raised interest rates just once, instead of the three times economists had predicted. Higher rates favor bond insurers, because they enhance the value of their guarantees to lower-rated issuers.
The three active bond insurers – Assured, Build America Mutual, and National Public Finance Guarantee – wrapped a total of $25.34 billion in 1,887 issues in 2016, up from $25.21 billion in 1,883 transactions in 2015. The growth in their business lagged behind the 12% growth in issuance, to a record $444.8 billion.
Assured's insured par in 2016 slipped 6% from $15.14 billion in 1,009 deals in 2015. In the fourth quarter alone, Assured insured $4.15 billion in 229 deals, for a market share of 61%. The figures include Assured's subsidiary Municipal Assurance Corp.
"Assured Guaranty continued to lead the industry in the fourth quarter of 2016 as its public finance insurance subsidiaries, AGM and MAC, insured 229 new issues," said Robert Tucker, senior managing director of communications and investor relations for Assured. "Our par insured was 77% ($1.8 billion) more than that of the next most active bond insurer. Including secondary market activity, we insured a total of almost $5 billion in the fourth quarter, an increase of 47% compared with the fourth quarter of 2015."
Tucker said that the company's success reflects the market's recognition of growth in its statutory capital and of claims-paying resources that materially exceed those of the next most active competitor as well as Assured having lower insured leverage ratios.
"Throughout 2016, Assured Guaranty exercised disciplined underwriting and pricing, and with our broad market acceptance, led the bond insurance industry in primary market par and transactions insured, as we have in aggregate over the last three years," said Tucker. "We were selected to guarantee 902 small, medium and large size new issues in 2016, with total par insured of $14.2 billion, $3 billion more than the combined total for the rest of the industry. Additionally, our municipal secondary market business continued to see significant gains. For full year 2016, we guaranteed $1.8 billion in the secondary market, a 91% increase from the 2015 level. We also benefited from our ability to assist the larger transactions, which typically have significant institutional investors demand, insuring 18 transactions with insured par amounts exceeding $100 million each for an aggregate par insured of $2.8 billion."
BAM's insured principal amount rose to $10.13 billion across 871 deals or 40% market share, from $9.57 billion or 38% market share in 2015. In the last three months of 2016, BAM insured $2.35 billion in 212 transactions.
"BAM's insurance proved its value through volatile market conditions during the fourth quarter, which wrapped up our best year to date," said Bob Cochran, BAM's chairman. "As expected, the heavy new-issue calendar in October translated to strong volume, but demand for BAM's guaranty also remained strong during the volatile weeks following the presidential election, when we insured several larger and higher quality issues, including a number of AA-minus rated transactions."
Cochran said investor demand for the mutual insurer's guaranty was strong as BAM's secondary market business increased more than 58% to $967 million. "We've also been able to leverage our internal technology platform to improve the turnaround on our BAM Credit Profiles, which are now available prior to pricing for most negotiated issues, and immediately after the award of most competitive sales," he said.
National finished the year with $975 million of par insurance, up 95% from 2015. Its market share almost doubled, to 3.8% from 2%.
"During 2016 National insured a record level of new business and made important strides towards re-establishing itself as a leading company in the bond insurance industry," said Tom Weyl, head of new business development at National. "Regarding the bond insurance industry, while the 2016 level and percentage of insured municipal bonds were relatively unchanged from the 2015 results, we expect that rising interest rates will enhance the appreciation for the value proposition that bond insurance provides to municipal bond issuers."
Weyl is confident that the industry continues to have substantial untapped opportunity and will continue to help educate select issuers and their financial advisors and underwriters, "who have fiduciary responsibilities to their debt issuing clients, about how bond insurance can improve the execution and reduce the costs of their debt offerings."
Legal Counsel
Orrick extended a run in the number one position that dates back to 1998, though its market share slipped. For the fourth quarter alone, Orrick had $8.22 billion in 118 deals or 8.2% market share.
Hawkins Delafield & Wood LLP finished in second place with $21.28 billion or 5% market share over 349 deals, all slightly down from the $23.08 billion or 6.2% market share over 397 deals the firm finished with during the same period of time the year prior. For the third quarter, Hawkins had a par amount of $5.38 billion or 5.4% market share in 81 deals.
Norton Rose Fulbright ranked third with $17.79 billion, followed by Kutak Rock LLP with $16.49 billion and McCall Parkhurst & Horton LLP with $15.03 billion.
Rounding out the top 10 are Chapman and Cutler LLP, Stradling Yocca Carlson & Rauth, Squire Patton Boggs, Gilmore & Bell PC and Bracewell LLP.
Hawkins held the top underwriters counsel spot and pushed further ahead, finishing the year with $24.21 billion in 135 deals, which compares with $17.44 billion in 151 deals in 2015.
"Lawyers in all nine of our offices were very busy in all major sectors, especially health care, housing, public power and governmental purpose," said Howard Zucker, managing partner at Hawkins. "Among the most noteworthy deals in which we participated were as Underwriters' Counsel in the $2.4 Billion bond issue for the rebuilding of LaGuardia Airport that was a P3 transaction, Bond Counsel for the refunding of bonds of the NYS Utility Debt Securitization Authority, and Bond Counsel or Underwriters' Counsel for a number of issues of income tax and/or sales tax-backed bonds."
Zucker said that Hawkins has more attorneys devoted to the full-time practice of public finance than any other law firm and that the trend for many years has been for increasing specialization and depth due to the ever-increasing complexity of municipal bond regulations, especially in the tax and securities areas, and sophistication of transactions.
"Today, more than any time before, law firms that want to be leaders in public finance have to be willing to commit significant resources to have the full range and depth of expertise in order to advise clients in the navigation of the matrix of issues in bond financings and regulatory compliance after issuance."
Zucker also said that the relationships with clients and the quality and experience of the attorneys are the keys to the firm's achievements.
"Hawkins is now 163 years old, and has been doing public finance for over 135 years, but we know we cannot rest of our laurels, and the culture of our firm is that we come to work each and every day to earn and deserve the trust and confidence of our clients," Zucker said.
Norton Rose Fulbright finished second among underwriters' counsel with $18.39 billion, Stradling Yocca Carlson & Rauth was in third with $13.15 billion, in fourth was Kutak Rock LLP with $12.73 billion and in fifth place with $12.26 billion was Orrick.
Rounding out the top ten are Nixon Peabody LLP, Squire Patton Boggs, Andrews Kurth LLP, Greenberg Traurig LLP and Bracewell LLP.
