Eagle Re issues first mortgage ILNs with exchangeable note feature

Eagle Re 2020-1 (Eagle Re) has funded $488 million of fully collateralised excess of loss reinsurance coverage for Radian Guaranty. The reinsurance was financed via the first mortgage insurance linked note (ILN) transaction to incorporate an exchangeable note feature.

Eagle Re is a newly formed Bermuda special purpose insurer that is not affiliated with Radian.

The unregistered private offering featured ILNs with a 10-year maturity and 7-year call option to eligible third-party capital markets investors. The notes pay coupons ranging from Libor plus 90 basis points to Libor plus 285 basis points. They are non-recourse to Radian Group, Radian Guaranty’s parent, or to its subsidiaries and affiliates.

In a feature unique to this transaction, investors have the option to exchange their M-2 Notes for proportionate interests in three classes of exchangeable notes after closing. M-2 Notes pay a coupon of Libor plus 200 basis points, with the exchangeable notes having the same coupon and varying levels of credit enhancement.

The reinsurance covers Radian’s eligible mortgage insurance policies in January through September 2019, excluding single premium payment policies.