Citizens Closes $950 Million Bond Deal; Has $9.4 Billion in Liquidity

Citizens Property Insurance Corporation issued the following press release earlier this week regarding the closing of two financial transactions that enabled an increased claims-paying liquidity for its personal and commercial lines accounts.

The news generated these headlines: 

Citizens issues bonds, lines up credit

Citizens gets $1 billion in credit

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TALLAHASSEE, Fla.  Citizens Property Insurance Corporation closed two separate financial transactions Tuesday that provide $1.95 billion in additional claims-paying liquidity for its Personal Lines Account and Commercial Lines Account.

“Together, these financings provide us significant additional liquidity resources for the 2007 hurricane season and beyond. In total, we now have over $9.4 billion readily available to pay claims after a storm,” said CFO Sharon Binnun.

The two financings consisted of a $1 billion 364-day bank line of credit with a syndicate of banks led by Citigroup and J.P. Morgan, and a $950 million taxable auction rate bond issue with a group of investment banks led by Citigroup.

Binnun also the financings were very well-received by the market, with the bond issue pricing at 5.20%, 12 basis points under the benchmark 30-day LIBOR rate of 5.32%

“As is the case with our other pre-event bond financings, we will invest the proceeds in high-grade short-term securities until they are needed to pay claims,” she said.

Binnun said the low rate achieved on the bonds reflects the market’s positive view of the credit quality of Citizens and allows Citizens “to use our investment income to offset most or all of the interest on the bonds.”

The bonds are rated Aaa/AAA by Moody’s and Standard and Poor’s, respectively, based on a bond insurance policy issued by Financial Guaranty Insurance Corporation, and carry underlying ratings of A2/A+.