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04/08/2008
Radian Notes Rating Agency Action Regarding Radian Group and Radian Guaranty
PHILADELPHIA, April 8, 2008 /PRNewswire-FirstCall/ -- Radian Group Inc. (NYSE: RDN) ("Radian") today stated that Standard & Poor's Ratings Services ("S&P") has lowered its ratings on Radian Group to 'BBB' from 'A-' and on its mortgage insurance subsidiary, Radian Guaranty, to 'A' from 'AA-.' Radian noted that S&P also announced credit rating changes with regard to several other companies in the mortgage insurance sector.
In light of the rating agency action, Radian is in the process of submitting a plan to the Government Sponsored Enterprises ("GSEs") that will define the objectives and strategies it will follow to serve the mortgage market now and in the months ahead. Radian has been engaged in ongoing, substantive conversations with both GSEs as mortgage market developments have unfolded. Radian has been a long standing Top Tier company with both GSEs and expects that it will continue to operate as such in the months and years ahead. The Company also announced that it is in discussions with banks participating in its credit facility regarding the amendment of certain covenants contained in this facility, including the covenant related to its ratings.
Additionally, Radian reported that it has also been actively considering a broad range of alternatives to strengthen its capital position. While no decision has been made yet, the Company is actively considering a range of alternatives including a possible public offering of common stock as well as capital infusions from outside parties. Radian noted that measures being considered to strengthen its capital position are not directly related to the company's ability to pay claims and that it retains adequate claims paying resources to cover its losses and pay all policyholders.
Radian is also evaluating strategic alternatives to maximize the value of its financial guaranty subsidiary, Radian Asset Assurance Inc. These alternatives could involve a full or partial sale of Radian Asset. The ultimate goal is to preserve the existing and future value of Radian Asset while also providing capital to Radian Group.
Radian Asset's insured portfolio has minimal exposure to the RMBS and CDO of ABS sectors that have affected a number of financial guarantors over the past several months. In addition, Radian Asset maintains $3.2 billion in claims paying resources and $1.3 billion in GAAP book value. The Company is firmly capitalized at the double-A ratings level and is not expected to require any additional capital in the near future.
Radian has been working closely with its advisors, including Lehman Brothers and Drinker Biddle, in exploring these potential initiatives. There can be no assurance that the exploration of alternatives will result in any agreements or transactions.
The Company will continue to keep its stockholders, customers, regulators and other constituents informed as it progresses through these processes.
Radian Group Inc. is a global credit risk management company headquartered in Philadelphia with significant operations in New York and London. Radian develops innovative financial solutions by applying its core mortgage credit risk expertise and structured finance capabilities to the credit enhancement needs of the capital markets worldwide, primarily through credit insurance products. The company also provides credit enhancement for public finance and other corporate and consumer assets on both a direct and reinsurance basis and holds strategic interests in credit-based consumer asset businesses. Additional information may be found at http://www.radian.com.
All statements in this news release that address events, developments or results that we expect or anticipate may occur in the future are "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the U.S. Private Securities Litigation Reform Act of 1995. These statements are made on the basis of management's current views and assumptions with respect to future events. Any forward-looking statement is not a guarantee of future performance and actual results could differ materially from those contained in the forward looking information. The forward-looking statements, as well as our prospects as a whole, are subject to risks and uncertainties, including the following:
-- Actual or perceived changes in general financial and political
conditions, such as extended national or regional economic
recessions, changes in housing demand or mortgage originations,
changes in housing values (in particular, further deterioration in
the housing, mortgage and related credit markets, which would harm
our future consolidated results of operations and, if more severe
than our current predictions, could cause losses for our mortgage
insurance business to be worse than expected), changes in the
liquidity in the capital markets and the further contraction of
credit markets, population trends and changes in household formation
patterns, changes in unemployment rates, changes or volatility in
interest rates or consumer confidence, changes in credit spreads,
changes in the way investors perceive the strength of private
mortgage insurers or financial guaranty providers, investor concern
over the credit quality and specific risks faced by the particular
businesses, municipalities or pools of assets covered by our
insurance; actual or perceived economic changes or catastrophic
events in geographic regions (both domestic and international) where
our mortgage insurance or financial guaranty insurance in force is
more concentrated.
-- Our ability to successfully obtain additional capital (which could
have a potential dilutive effect upon our existing stockholders and
could, reduce our per-share earnings), including through a full or
partial sale of Radian Asset, in the event it is determined that
capital is required to support our long-term liquidity needs and to
protect our credit and financial strength ratings or to preserve the
existing and future value of Radian Asset.
-- Downgrades or threatened downgrades of, or other ratings actions with
respect to, our credit ratings or the insurance financial strength
ratings assigned by the major rating agencies to any of our rated
insurance subsidiaries at any time, including with respect to the
following: Radian Group Inc. currently has been assigned a senior
debt rating of BBB (CreditWatch with negative implications) by S&P,
A2 (under review for possible downgrade) by Moody's and A- (Ratings
Watch Negative) by Fitch. Our credit ratings generally impact the
interest rates that we pay on money that we borrow. A downgrade in
our credit ratings could increase our cost of borrowing, which could
have an adverse affect on our liquidity, financial condition and
operating results. In addition, under our existing $400 million
credit facility, our senior debt ratings, as provided by S&P and
Moody's, may not (1) at the same time be lower than A- for S&P and A3
for Moody's, or (2) be lower than either BBB for S&P or Baa2 for
Moody's. If this were to occur, we would be in default under our
credit agreement and the lenders representing a majority of the debt
under our credit agreement would have the right to terminate all
commitments under the credit agreement and declare the outstanding
debt due and payable. If the debt under our credit agreement were
accelerated in this manner and not repaid, the holders of 10% or more
of our publicly traded $250 million 7.75% Debentures due in June 2011
and the holders of 25% or more of our publicly traded $250 million
5.625% Senior Notes due in February 2013, each would have the right
to accelerate the maturity of that debt. We are in discussions with
the banks participating in our credit facility regarding an amendment
of certain covenants contained in this facility, including the
covenant related to our ratings. In the event we are not able to
obtain such amendment or other waiver before the amounts due under
our credit agreement or any series of our outstanding long-term debt
are accelerated, we may not have sufficient funds to repay any such
amounts.
-- Heightened competition for our mortgage insurance business from other
private mortgage insurers that have been assigned higher ratings from
the major ratings agencies.
-- Our ability to retain our "Top Tier" eligibility requirement from
both Freddie Mac and Fannie Mae. Freddie Mac's and Fannie Mae's
eligibility requirements for "Top Tier" mortgage insurers currently
require such insurers to maintain an insurer financial strength
rating of AA- or Aa3 from at least two of the three ratings agencies
that customarily rate them; however, both Freddie Mac and Fannie Mae
have indicated that loss of "Top Tier" mortgage insurer eligibility
due to such a downgrade will no longer be automatic and will be
subject to review if and when it occurs. Given our recent downgrade
by S&P, we cannot be certain that we will continue to retain "Top
Tier" eligibility from either Freddie Mac or Fannie Mae. If we were
to lose "Top Tier" eligibility, Freddie Mac and/or Fannie Mae could
restrict us from conducting certain types of business with them or
take actions that may include not purchasing loans insured by us,
which would have a material adverse impact on the franchise value of
our mortgage insurance business and our future prospects and could
negatively impact our results of operations and financial condition.
For more information regarding these risks and uncertainties, as well as certain additional risks that we face, you should refer to the Risk Factors detailed in Part I, Item 1A of our Annual Report on Form 10-K for the year ended December 31, 2007. We caution you not to place undue reliance on these forward-looking statements, which are current only as of the date of this news release. We do not intend to, and we disclaim any duty or obligation to, update or revise any forward-looking statements made in this news release to reflect new information or future events or for any other reason.
Contact: For Investors: Terri Williams-Perry - phone: 215 231.1486 Email: terri.williams-perry@radian.com For the Media: Rick Gillespie - phone: 215 231.1061 Email: rick.gillespie@radian.com Steve Frankel / Tim Lynch Joele Frank, Wilkinson Brimmer Katcher 212 355.4449 SOURCE Radian Group Inc.