Connie Lee Completes Its Private Placement, Set for Primary Market
The College Construction Loan Insurance Association this week completed the private placement of a $65 million preferred stock issue, paving the way for the federally chartered reinsurer's entrance into the new-issue insurance market.
In a phone interview, Oliver R. Sockwell, president and chief executive officer of the firm, said Connie Lee on Monday closed the deal and significantly reordered its ownership structure. Connie Lee is now 50% owned by private shareholders, 35% owned by the Student Loan Marketing Association, and 15% owned by the U.S. Department of Education.
The formal announcement of the private placement will take place today at 1:30, when Mr. Sockwell and John B. Childers, deputy assistant secretary for higher education programs at the Education Department, have scheduled a press conference. Mr. Sockwell declined to comment on any other upcoming announcements.
The preferred sale does not represent a pure cash infusion. As part of the transaction, the Education Department sold a $10 million stake to the new investors. Of the $55 million in new money, about $51 million ended up in College Construction's operating subsidiary, Connie Lee, Mr. Sockwell said.
It has long been Connie Lee's mission to enter the primary insurance market, and indeed its congressional charter states that the firm will pursue the market. The charter, however, restricts Connie Lee from engaging in any of the "top three rated" tiers of municipals. This is generally interpreted to mean A and above.
Connie Lee is also restricted in the bond types it can insure. Created to assist the educational borrowing needs in the country, the company is allowed to operate only in the teaching-hospital and educational sectors. Together, these sectors accounted for about 18% of all municipal new issuance in 1990 and year to date in 1991, according to Securities Data Co./The Bond Buyer.
Insurance sources expressed little surprise at the private placement. An executive at one major insurer said "there's room for them in these new-issue categories." Connie Lee's pricing strategies, sources said, remain to be seen.
The investors solicited for the sale were "primarily strong and stable financial institutions," Mr. Sockwell said. Examples of preferred holders include: the Pennsylvania Public School Employees Retirement Fund; Metropolitan Life Insurance Co.; Kemper Financial Services; and the Rockefeller Family Funds and Trust.
"Their names alone evidence a commitment to higher education," Mr. Sockwell said.
Connie Lee's underwriter was First Boston Corp. The shares themselves hold no technically "preferred" status and were termed so at the behest of one investor, he said.