Essent Guaranty has now secured almost $558 million of capital markets backed mortgage reinsurance protection with its latest and sixth mortgage insurance-linked securities (ILS) transaction, after the Radnor Re 2021-1 Ltd. issuance closed at keen pricing for the company.
As we reported over a week ago, Essent Guaranty returned for its first mortgage ILS of 2021, its sixth in all and this transaction is now the companies largest issuance to-date, at almost $558 million.
The issuance of mortgage insurance-linked notes was closed yesterday and our sources suggest the pricing was particularly keen for the sponsor.
Essent explained that the deal secured it $557.9 million of fully collateralized excess of loss reinsurance coverage on mortgage insurance policies it had under written between August 2020 and March 2021, via the issuance of five tranches of notes by newly formed Bermuda special purpose insurer Radnor Re 2021-1 Ltd.
As a result, Radnor Re 2021-1 Ltd. funded its reinsurance obligations to Essent via the sale of the five classes of mortgage insurance-linked notes to eligible third party capital markets investors, each of which have 12.5-year legal maturities.
The transaction breaks down as follows, along with the final priced coupons:
- $139,478,000 Class M-1A Notes with an initial interest rate of SOFR Rate plus 165 basis points;
- $132,504,000 Class M-1B Notes with an initial interest rate of SOFR Rate plus 170 basis points;
- $153,426,000 Class M-1C Notes with an initial interest rate of SOFR Rate plus 270 basis points;
- $97,634,000 Class M-2 Notes with an initial interest rate of SOFR Rate plus 315 basis points;
- $34,869,000 Class B-1 Notes with an initial interest rate of SOFR Rate plus 400 basis points.
However, we’re told the pricing has been particularly keen for some of those tranches.
For example, the M-1A notes were offered with spread guidance of 165 to 175 bps; the Class M-1B had guidance of 175 to 190 bps; M-1 C were marketed at the 270 they priced at; the M-2 notes had guidance of 325 to 340 bps; and the B-1 notes had spread guidance of 420 to 435 bps.
So some of those tranches priced well below guidance, suggesting strong demand from capital market investors that will have helped Essent to attractive execution for this deal.
With this latest issuance complete, mortgage insurance-linked securities transactions brought to market in the first-half of the year have now raised their sponsors $3.7 billion of collateralized reinsurance protection.