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Ambac Insures $264 Million Military Housing Transaction for AMC West Housing, LP


NEW YORK. -- Ambac Financial Group, Inc. (NYSE: ABK) (Ambac) today announced that it has partnered with the United States Air Force, Balfour Beatty Construction Co., as developer, and Capmark Finance, as lender, to finance the $264 million Air Mobility Command (AMC) West military housing transaction. The transaction involves the privatization of over 3,500 existing single-family and townhouse-style housing units at three separate bases – Fairchild Air Force Base in Spokane, Washington; Tinker Air Force Base in Oklahoma City, Oklahoma; and Travis Air Force Base in Fairfield, California. At the end of the seven-year development period the financing will provide 2,400 new and rehabilitated homes for service members and their families at the bases. The three bases make up the western component of the Air Force’s AMC. AMC’s mission is to provide rapid airlift, air refueling, special air mission, and aero-medical evacuation for the military.

The project will primarily be financed by $264 million in taxable mortgage loans insured by Ambac. In addition to the insured loans, other sources of funds will include a $137 million subordinate loan provided by the Air Force; an equity contribution of $14 million from the developer; a $6 million equity contribution from the Air Force, and net operating income and interest earnings during the development period. The transaction received public ratings from Standard & Poor’s of AA+ (Series A1-a), AA- (Series A1-b) and A (Series A2). The transaction priced on July 10, 2008 and the Series A1-a and Series A2 loans are scheduled to close on July 21, 2008. The Series A1-b loans are scheduled to close on June 1, 2010 with Ambac’s forward commitment to provide insurance at that date.

For over a decade Ambac has been a leader in the military housing privatization sector. Our expertise in sound deal structuring was forged over many years of active collaboration with lenders, underwriters, private developers, and representatives of all branches of the military service. Since 1998 Ambac has guaranteed approximately $7.8 billion in military housing debt securities, providing developers and underwriters with efficient, cost effective access to the capital markets for the development of quality military family housing at installations nationwide. Investors have trusted and relied upon Ambac’s underwriting expertise and stringent portfolio performance monitoring as part of their decision to direct capital to this critical, high-priority initiative of the U.S. Department of Defense.

Ambac Senior Managing Director and head of Public Finance, Robert Shoback, stated, “This transaction demonstrates the value Ambac adds is beyond the interest rate benefits associated with our guarantee. Large, sophisticated investors in the market purchased these Ambac-wrapped certificates based on key aspects of our underwriting and surveillance process, including: (i) our conservative, independent, and thorough analysis of the transaction which included a site visit and independent legal review; (ii) our development of proprietary internal modeling for stress testing military housing transactions; (iii) our structuring expertise, particularly to mitigate construction risks; (iv) our serving as sole bond holder representative monitoring the transaction on a monthly basis; (v) our performance of ongoing surveillance, giving us the ability to intervene early to correct troublesome trends; and (vi) our providing direct access to underwriters and openly providing reports to fixed income investors.” Mr. Shoback continued, “Ambac has long-standing relationships with many key developers, lenders and underwriters and we expect to continue to underwrite transactions in this sector.”


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