Assured Guaranty entered into an agreement with Sound Point Capital Management pursuant to which Assured Guaranty will contribute its entire equity interest in Assured Investment Management and, with certain exceptions, its related asset management entities to Sound Point.
In addition, U.S. insurers Assured Guaranty Municipal Corp. and Assured Guaranty Corp. will engage Sound Point as their sole alternative credit manager to invest $1 billion over time in alternative credit strategies, including nearly $400 million currently managed by AssuredIM as of Dec. 31, 2022.
In exchange, Assured Guaranty will receive a 30% ownership interest in the combined business, subject to potential post-closing adjustments.
Assured Guaranty acquired AssuredIM (formerly BlueMountain Capital Management) in Oct. 2019. AssuredIM will transfer assets under management (AUM) of approximately $15.2 billion, including approximately $14.5 billion of collateralized loan obligations (CLOs), as of Dec. 31, 2022, to Sound Point upon completion of the transaction.
“We expect this transaction to significantly benefit both Assured Guaranty and Sound Point and to be accretive to Assured Guaranty’s shareholders. Our investment in Sound Point should provide significant incremental value because the combined business will benefit from Sound Point’s scaled investment platform, as well as both firms’ established distribution channels and well-earned reputations for generating attractive returns for their investors,” Dominic Frederico, president and CEO of Assured Guaranty, said. “This combination further advances two of the objectives we set out when we entered the asset management business.
“The first objective was to establish a fee-based earnings stream independent of the risk-based premiums generated by our financial guaranty business. To accomplish this, we converted virtually all of AssuredIM’s assets under management into fee-earning AUM. Our 30% investment in the combined firm will advance this earnings diversification strategy through a compelling investment management business that is expected to grow and generate significant net income and free cash flow.
“The second objective was to enhance the alternative investment opportunities for our financial guaranty subsidiaries’ investment portfolios. AssuredIM was successful in meeting this objective, and we’re confident Sound Point’s proven track record managing such investments will be strengthened by the addition of AssuredIM’s AUM.”
Assured Guaranty expects the transaction to be immediately accretive to earnings per share, return on equity and book value per share, as well as the company’s adjusted operating shareholders’ equity per share and adjusted book value per share. It also plans to continue its current capital management program, including share repurchases.
The transaction is expected to be completed in the third quarter of 2023, subject to certain customary closing conditions, including the receipt of certain consents and regulatory approval. Following closing, Frederico will be appointed to the Sound Point board of managers.
Assured Healthcare Partners will remain an independent healthcare investment management firm and is not part of the Sound Point transaction. Carried interest associated with Assured Healthcare Partners funds and another single-asset fund in which Assured Guaranty is invested will be retained by Assured Guaranty, as well.
Goldman Sachs and Insurance Advisory Partners served as financial advisors, and Mayer Brown and Milbank acted as legal advisors, to Assured Guaranty. Bank of America acted as financial advisor, and Pryor Cashman and DLA Piper acted as legal advisors, to Sound Point.