After spending more than a year and a half trying to launch the Municipal Infrastructure and Assurance Corp., executive vice president Richard Kolman Monday announced that he left the start-up bond insurer to join U.S. Bancorp, which is launching a muni underwriting business.
“Although I still believe in the value of bond insurance and the value of MIAC, the U.S. Bank is presenting me with a terrific opportunity to build a business which will complement their widespread existing client relationships with government, nonprofit, health care, real estate, and commercial banking customers,” Kolman said in an e-mailed statement.
U.S. Bancorp, the parent of U.S. Bank, is the fifth-largest commercial bank in the country with $282 billion in assets, according to the bank’s internal data as of March 31.
It confirmed yesterday that Kolman was named head of a new municipal securities group, based in New York, which will focus on the origination, underwriting, sales, remarketing, and trading of both floating- and fixed-rate municipal debt.
Alongside Kolman will be Alex Wallace, formerly managing director and head of public finance at Wachovia Securities. He will lead public finance and origination from Charlotte, N.C.
The division will be part of the capital markets group, led by executive vice president Jeff Stuart.
“The establishment of a municipal bond capability is the next logical step in the continued development of our capital markets franchise,” Stuart said. “This new product capability will help us build stronger, deeper relationships as a full-service adviser to clients with capital raising needs. The addition of a seasoned professional like Rick Kolman will be a key element in building the business.”
U.S. Bank has been involved in public finance for more than 75 years, but as an agent and trustee rather than as an underwriter. Last year it was the second-ranked trustee in the country, managing 1,028 issues with a value of $58.5 billion, according to Thomson Reuters. As underwriter, its operations were nominal — it senior managed two issues worth $4.2 million, and it didn’t co-manage any deals.
Dick Payne, U.S. Bank’s vice chairman of corporate banking, said the new division is part of a strategy “to transform our corporate banking business from a regionally focused organization to a national business positioned to provide a full range of financial services to the nation’s largest companies, municipalities and nonprofit organizations in all fifty states.”
Kolman, whose first day was yesterday, is a well-known figure in the municipal world.
From 1978 to 2007 he worked at Goldman, Sachs & Co., including as co-head of municipal finance from 1999 to 2004. When he left Goldman to form MIAC, he was presented with the Honor Roll award by the Securities Industry and Financial Markets Association for making significant contributions to the muni industry throughout his career.
A spokesman for MIAC said Kolman’s departure would not affect the insurer’s plans, though he declined to propose a timeline for when MIAC might enter the market.
“Rick’s decision to pursue this new opportunity is exciting given his experience, but has no bearing on MIAC’s business strategy, or the management team, which remain unchanged,” the spokesman said. “He’s has made a very valuable contribution to MIAC’s development to date, and we wish him — the whole team — all the best in his new role.”
The spokesman also called Kolman’s new role “complementary” to MIAC, in the sense that underwriters do not compete with insurers. Moreover, he said Kolman would be “exploring options to continue his involvement with MIAC as an independent director.”
He said an immediate replacement would not be sought after, adding that “our team is pretty deep across the board” and capable of moving forward.
In recent months, MIAC has struggled to finalize its capitalization plans and receive the high ratings that are a prerequisite to entering the business as a financial guaranty insurer of municipal debt.
The firm was originally funded by Macquarie Group and Citadel Investment Group, but several months ago it was rumored that Citadel had backed out.
The MIAC spokesman yesterday confirmed that Citadel is “not involved in the same capacity as it was initially,” but declined to elaborate.
MIAC received a license from the New York Insurance Department to act as a financial guarantor in October 2008, and in February 2009 it announced it had received approval from the National Association of Insurance Commissioners to expedite the insurance licensing process across all 50 states.Since then, however, news from the firm has been scarce, and proposed times for market entry have come and gone.
As MIAC struggled to enter the market, the bond insurance industry remains dominated by a single firm, Assured Guaranty Ltd. Through its two platforms, Assured Guaranty and Assured Guaranty Municipal, it guaranteed 6.3% of the $103.73 billion that came to market in the first quarter.