Report: Citizens to issue bonds
Mar 27, 2008
Orlando Business Journal–Mar. 26, 2008
Florida’s state-run property insurer may be taking steps to insure that it has funding to pay claims immediately after a hurricane.
The board of governors of Citizens Property Insurance Corp. authorized the sale of between $1.5 billion and $2 billion of tax-exempt bonds, according to a report in The Bond Buyer. It is the first time the insurer has sold tax-exempt debt to provide liquidity prior to a hurricane, the trade journal reported.
The exact amount of debt to be sold won’t be determined until the bonds are priced, which is expected at the end of April or early May. The market is volatile, so decisions about insuring the bonds and even a switch to a different product, such as taxable debt, have yet to be finalized, according to the report.
Citizens has not determined the maturity schedule for the bonds. Raymond James & Associates in St. Petersburg, which is Citizens’ financial adviser on the deal, expects the bonds to mature in six years or less, the report says.
Citizens previously issued taxable auction-rate securities, but the subprime meltdown impacted the auction-rate market, causing interest rates the insurer paid on its debt to increase. In contrast, fixed-rate, short-term financing allows the insurer to know its maximum interest expense, Citizens Chief Financial Officer Sharon Binnun told The Bond Buyer.
Senior underwriters on the deal are Citi, Goldman Sachs & Co., Morgan Stanley and UBS Securities LLC. Co-managers have not yet been selected.
Florida’s Office of Insurance Regulation still must approve the sale.