Arch Mortgage Insurance Company (Arch MI) has completed its second mortgage insurance linked note (MILN) transaction of 2021.
Arch MI obtained over $616 million of indemnity reinsurance on a pool representing approximately $36 billion of mortgages from Bellemeade Re 2021-2, the special purpose reinsurer.
The coverage was obtained by issuing approximately $523 million in bonds and $93 million in direct reinsurance.
The transaction covered a portfolio of MI policies issued by Arch MI and affiliates between December 2020 and March 2021. It was the second Bellemeade transaction to use the Secured Overnight Financing Rate (SOFR) as the benchmark rate for pricing instead of the London Inter-Bank Offered Rate (LIBOR).
Bellemeade Re 2021-2 is funding its reinsurance obligations through the issuance of five classes of amortising notes with 10-year legal final maturities. These included $194,532,000 class M-1A notes with a coupon equal to one-month SOFR plus 120 basis points; $93,334,000 class M-1B notes with a coupon equal to one-month SOFR plus 150 basis points; $97,265,000 class M-1C notes with a coupon equal to one-month SOFR plus 185 basis points; $105,704,000 class M-2 notes with a coupon equal to one-month SOFR plus 290 basis points; and $31,972,000 class B-1 notes with a coupon equal to one-month SOFR plus 415 basis points.
A total of $93,214,000 was placed with a panel of reinsurers.
The notes received ratings ranging from A1 for the senior M-1A notes down to B3 for the B-1 notes from Moody’s, and between BBB (high) for the M-1A notes down to BBB for the M1B notes from DBRS Morningstar.
Arch also created a B2 class of notes for this transaction that it will not issue at this time.
Jim Bennison, executive vice president of alternative markets for Arch MI, said: “This transaction’s execution represents the broadest investor participation at the best pricing for current exposure in the Bellemeade programme’s history.”
The deal represented Bellemeade’s 16th since the programme’s inception in 2015.
Arch Mortgage Insurance Company, Bellemeade, Jim Bennison, Moody's, DBRS Morningstar