Sound Point Capital Management, LP, a credit-oriented investment manager, has entered into an agreement to acquire Assured Investment Management LLC and certain of its related asset management entities (Assured-IM), which conducts the institutional asset management business of Assured Guaranty Ltd. (together with its affiliates, Assured Guaranty).
Once the acquisition is completed, Assured Guaranty will become a significant equity holder of Sound Point, and certain of Assured Guaranty’s US insurance subsidiaries will commit to invest $1 billion over time in Sound Point managed vehicles and separately managed accounts, which includes nearly $400 million currently managed by AssuredIM as of December 31, 2022.
In exchange, Assured Guaranty will receive a 30% ownership interest in the combined business, subject to potential post-closing adjustments.
At the same time, Sound Point will become the sole alternative credit manager for the Assured Guaranty US insurance subsidiaries.
Additionally, the acquisition will see AssuredIM transfer assets under management (AUM) of approximately $15.2 billion, including approximately $14.5 billion of collateralized loan obligations (CLOs), as of December 31, 2022, to Sound Point upon completion of the transaction.
As a result, Sound Point, which had approximately $21.4 billion in CLOs and $32 billion in total AUM as of December 31, 2022, is expected to become the fifth largest CLO manager by AUM in the world.
Sound Point is currently managing 39 CLOs of its own. The firm also manages over $10 billion of assets in other areas of credit investing, including direct loans, capital solutions, distressed, structured products, commercial real estate lending, and specialty finance.
“We expect this transaction to significantly benefit both Assured Guaranty and Sound Point and to be accretive to Assured Guaranty’s shareholders. Our investment in Sound Point should provide significant incremental value because the combined business will benefit from Sound Point’s scaled investment platform, as well as both firms’ established distribution channels and well-earned reputations for generating attractive returns for their investors,” said Dominic Frederico, President and CEO of Assured Guaranty.
He added: “This combination further advances two of the objectives we set out when we entered the asset management business.
“The first objective was to establish a fee-based earnings stream independent of the risk-based premiums generated by our financial guaranty business. To accomplish this, we converted virtually all of AssuredIM’s assets under management into fee-earning AUM. Our 30% investment in the combined firm will advance this earnings diversification strategy through a compelling investment management business that is expected to grow and generate significant net income and free cash flow.
“The second objective was to enhance the alternative investment opportunities for our financial guaranty subsidiaries’ investment portfolios. AssuredIM was successful in meeting this objective, and we’re confident Sound Point’s proven track record managing such investments will be strengthened by the addition of AssuredIM’s AUM.”
Stephen Ketchum, Sound Point’s founder and Managing Partner, added: “This is a watershed event in Sound Point’s growth story, and it positions us for continued success in a business where scale has become increasingly important. It’s our largest transaction to date, and we’re extremely proud to be receiving a one-billion-dollar investment commitment over time from Assured Guaranty. We’re thrilled to be expanding our diversified platform through a powerful new partnership that will create immediate impact.”
David Grill, Head of Strategy at Sound Point, commented: “This acquisition further strengthens our platform and will allow Sound Point to leverage its already comprehensive firmwide infrastructure and investment teams. Assured Guaranty’s investment commitment will be allocated to Sound Point managed CLOs as well as a range of other credit strategies.”
The transaction is expected to be completed in Q322, subject to certain customary closing conditions, including the receipt of certain consents and regulatory approval. Following the completion, Frederico will be appointed to the Sound Point Board of Managers. As part of the acquisition, a major number of employees from Assured-IM are expected to join Sound Point, in both its New York and London headquarters.
Further, Assured Healthcare Partners LLC will remain an independent healthcare investment management firm and is not part of the Sound Point transaction. Carried interest associated with Assured Healthcare Partners funds and another single-asset fund in which Assured Guaranty is invested will be retained by Assured Guaranty, as well.
Sound Point will also remain a privately held company, with Stephen Ketchum as Managing Partner and Chief Investment Officer and the firm’s controlling equity holder.
Goldman Sachs & Co. LLC and Insurance Advisory Partners LLC served as financial advisors, and Mayer Brown LLP and Milbank LLP acted as legal advisors, to Assured Guaranty. Bank of America acted as financial advisor, and Pryor Cashman LLP and DLA Piper acted as legal advisors to Sound Point.
