BAM Announces Kroll Bond Rating Agency Upgrades Fidus Re Series 2018-1 to AA-Plus

BY Business Wire | MUNICIPAL | 03/15/23 03:19 PM EDT

Affirms AA Rating on Series 2021-1 Notes

NEW YORK--(BUSINESS WIRE)-- Kroll Bond Rating Agency upgraded its rating on Fidus Re?s $100 million Series 2018-1 Notes (Fidus I) to AA+ and affirmed its AA rating on Fidus Re?s $150 million Series 2021-1 Notes (Fidus II). The transactions were sold to fund collateralized excess-of-loss reinsurance agreements that provide additional claims-paying resources for Build America Mutual.

Kroll said the upgrade of Fidus I ?primarily reflects actual amortization of the financial guarantee portfolio at a rate which exceeds the scheduled amortization at transaction issuance.? As a result, ?the likelihood or probability that the modeled stress losses on the insured credit risk will exceed the attachment point has decreased, even at a higher confidence interval.?

BAM has paid no losses on the credits covered by the Fidus reinsurance agreements or any other insured exposures and has no credits on its Watch List.

The Fidus I notes insure losses in excess of $165 million on a covered portfolio that includes most transactions insured by BAM through December 31, 2017. The Fidus II notes insure losses in excess of $135 million on a covered portfolio that primarily includes transactions insured by BAM between January 1, 2018 and October 31, 2020.

About Build America Mutual

BAM is a mutual bond insurance company operated for the benefit of its members ? the cities, states, and other municipal entities that use BAM?s financial guaranty to lower their cost of borrowing ? and BAM is the preferred provider of bond insurance for members of the National League of Cities, and was launched in 2012 with initial capital provided by subsidiaries of White Mountains Insurance Group, Ltd. (WTM) .

As of December 31, 2022, there were $98 billion of BAM-insured municipal bonds outstanding for approximately 5,000 member-issuers.

Source: Build America Mutual

In general the bond market is volatile, and fixed income securities carry interest rate risk. (As interest rates rise, bond prices usually fall, and vice versa. This effect is usually more pronounced for longer-term securities.) Fixed income securities also carry inflation risk and credit and default risks for both issuers and counterparties. Unlike individual bonds, most bond funds do not have a maturity date, so avoiding losses caused by price volatility by holding them until maturity is not possible.

Lower-quality debt securities generally offer higher yields, but also involve greater risk of default or price changes due to potential changes in the credit quality of the issuer. Any fixed income security sold or redeemed prior to maturity may be subject to loss.

Before investing, consider the funds' investment objectives, risks, charges, and expenses. Contact Fidelity for a prospectus or, if available, a summary prospectus containing this information. Read it carefully.