Department of Financial Services, OIR – Insurance Regulation

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    DEPARTMENT OF FINANCIAL SERVICES

    OIR – Insurance Regulation

    Order Approving Citizens Coastal Account Bond Issuance and Related Documents

    IN THE MATTER OF:

    CITIZENS PROPERTY

    INSURANCE CORPORATIONCASE NO.: 171229-15

    ___________________________/

    ORDER APPROVING CITIZENS PROPERTY INSURANCE

    CORPORATION’S COASTAL ACCOUNT

    BOND ISSUANCE AND RELATED DOCUMENTS

    THISMATTER came before the Office of Insurance Regulation (the ‘‘Office”) for consideration and final agency action upon the request of Citizens Property Insurance Corporation (“Citizens”), pursuant to Section 627.351(6), Florida Statutes, as amended (the “Citizens Act”), and Sections 19(B) and 20 of Citizens’ Plan of Operation (the “Plan of Operation”), for approval of the issuance by Citizens of its Coastal Account Senior Secured Bonds, Series 2015A,in the aggregate principal amount of not exceeding One Billion U.S. Dollars ($1,000,000,000) (the “Series 2015A Bonds”) and related documentation. Citizens’ request is based on the adoption by its Board of Governors (the “Board”) of the resolution attached hereto as “Exhibit A” (the “Authorizing Resolution”),authorizing the issuance of the Series 2015ABondsand related documentation. The Series 2015A Bonds may consist of one or more subseries.

    Each separate subseries of Series2015A Bonds shall be differentiated from other subseries of Series 2015A Bonds by a number designation, starting with the number “1,” so that the first subseries of Series 2015A Bonds shall be designated as “Series 2015A-1 Bonds,” the second subseries of Series 2015A Bonds shall be designated as “Series2015A-2 Bonds,” and so on. The Series2015A Bonds are to be issued pursuant to that certain Trust Indenture dated as of August 6, 1997 (the “1997 Indenture”), as amended to date, by and between Citizens and Regions Bank, as successor Indenture Trustee (the “Indenture Trustee”), as further amended by a Tenth Supplemental Indenture by and between Citizens and the Indenture Trustee (the “Tenth Supplemental Indenture” and, together with the 1997 Indenture as amended to date, the “Indenture”). The Tenth Supplemental Indenture is to be in substantially the same form as the copy received and reviewed by the Office prior to the entry of this Order.

    The Series 2015A Bonds may be issued bearing interest at fixed or variable rates, including Adjusted SIFMA Rates or such other floating rate or rates as shall be provided for in the Tenth Supplemental Indenture; be issued as tax-exempt bonds; have the benefit of any credit enhancement as determined pursuant to the Authorizing Resolution; and maybe sold through a public offering or private placement. The final maturity of the Series 2015A Bonds shall be no later than June 1, 2025.TheTenth Supplemental Indenture approved hereby may be modified as necessary to reflect the final details of the Series 2015A Bonds.

    Citizens is also entering into or will utilize, as applicable, other related documents and agreements in connection with the issuance of the Series 2015A Bonds as described in the Authorizing Resolution.

    Citizens is a statutorily-created corporation and government entity that is an integral part of the State of Florida, established pursuant to the Citizens Act. Citizens, through its Coastal Account, is a significant provider of residential and commercial windstorm insurance in the State of Florida and, as such, must have immediate access to funding sources for the Coastal Account pending receipt of the Coastal Account’s ordinary and customary revenues and reinsurance and other reimbursement funds to meet policyholder claims and other obligations resulting from ordinary losses or catastrophic hurricanes or other weather-related events.

    The Citizens Act authorizes Citizens to borrow funds for the Coastal Account by issuing bonds or by incurring other indebtedness and to pledge assessments under the Act and other funds available to Citizens’ Coastal Account as the source of security and repayment for such borrowings. Section 627.351(6)(c)(3), Florida Statutes, states that Citizens may issue bonds or incur other indebtedness in the absence of a hurricane or other weather-related event, upon a determination by Citizens, subject to approval by the Office, that such action would enable it to efficiently meet the financial obligations of Citizens and that such financings are reasonably necessary to effectuate the requirements of the Citizens Act.

    The Citizens Act and the Plan Of Operation authorize Citizens to issue bonds in the absence of a hurricane or other weather-related event and the Plan of Operation, in Section 20(D), contains a determination by the Board that such advance financings constitute financing mechanisms under the Act that will allow Citizens to efficiently meet the financial obligations of the Coastal Account and that such financings are reasonably necessary to effectuate the requirements of the Act.

    On April 7, 2015, Citizens’ Board adopted the Authorizing Resolution authorizing the issuance of the Series 2015ABonds, in one or more subseries, in the aggregate principal amount of not exceeding One Billion U.S. Dollars ($1,000,000,000), to pay policyholder claims and other obligations of the Coastal Account. As reflected in the attached “Exhibit A,” the Authorizing Resolution contains a finding by Citizens’ Board that, in order to provide funds to meet policyholder claims and other obligations of the Coastal Account, it is in the best interests of Citizens to issue the Series 2015A Bonds. As further reflected in the attached “Exhibit A,” the Authorizing Resolution contains a determination by Citizens’ Board that the proceeds derived from the Series 2015A Bonds are reasonably necessary to enable Citizens to efficiently meet the financial obligations of the Coastal Account and to effectuate the requirements of the Citizens Act.

    As required by Section 19(B) of the Plan of Operation, Citizens has filed with the Office a statement of the purpose of the Series 2015A Bonds, a copy of the Tenth Supplemental Indenture insubstantially final form, (including, without limitation, the form of the Master Trust Indenture referred to herein below) and an estimate of the costs to be incurred by Citizens in connection with the issuance of the entire aggregate principal amount (i.e., One Billion U.S. Dollars ($1,000,000,000)) of the Series2015A Bonds.

    In connection with the issuance of the Series 2015A Bonds, Citizens desires to amend and restate the Indenture in its entirety, as more specifically set forth in Article VI of the Tenth Supplemental Indenture and as reflected in the form of the Master Trust Indenture set forth in Exhibit B to the Tenth Supplemental Indenture (the “Master Trust Indenture”), with such amendments and the Master Trust Indenture to be effective no earlier than the Conversion Date (as defined in the Tenth Supplemental Indenture).

    By virtue of their purchase of the Series 2015A Bonds, the purchasers thereof will have consented to and approved (i) the amendment and restatement of the Indenture in its entirety, (ii) the execution and delivery of the Master Trust Indenture, and (iii) the conversion of the Series 2015A Bonds that mature after the Conversion Date from obligations issued and secured under the provisions of the Indenture to obligations issued and secured under the provisions of the Master Trust Indenture.

    The Office, having considered this submission, and being otherwise advised in the premises, hereby finds that:

    1. The Officehasjurisdictionoverthesubjectmatterof,andthepartiesto,this proceeding pursuant to the Citizens Act.

    2. The Series 2015A Bonds are being issued for the purpose of providing additional resources to assist Citizens in covering policyholders’ claims and expenses in the Coastal Account and are hereby determined to be for a valid purpose under the Citizens Act. The Series 2015A Bonds will enable Citizens to efficiently meet its financial obligations and are reasonably necessary to effectuate the requirements of the Citizens Act.

    3. Each of the Indenture and the Master Trust Indenture is hereby deemed to be a “trust indenture” within the meaning of, and is approved for purposes of, Section 19(B) of the Plan of Operation.

    4. Pursuant to the Citizens Act, and Sections 19(B) and 20 of the Plan of Operation, Citizens has authority to enter into the Tenth Supplemental Indenture in connection with the issuance of the Series 2015ABonds,to issue the Series 2015A Bonds under the Indenture and with the details and characteristics described herein and in the Authorizing Resolution, and to make the Series2015ABonds payable and secured as provided in the Indenture. Citizens further has authority to enter into the Master Trust Indenture as contemplated by and provided for in the Authorizing Resolution, to have the Series 2015A Bonds that mature after the Conversion Date convert from obligations issued and secured under the Indenture to obligations issued and secured under the Master Trust Indenture, and to make such Series 2015A Bonds payable and secured as provided in the Master Trust Indenture.

    IT IS THEREFOREORDERED:

    That the Office recognizes that on April7, 2015, the Board adopted the Authorizing Resolution which delegates authority to the Chairman to (i) set the details of the Series 2015A Bonds, and (ii) award and sell the Series 2015A Bonds to the Underwriters, all within the parameters set forth therein and herein.

    The Office of Insurance Regulation hereby APPROVES:

    A. The Tenth Supplemental Indenture.

    B. The issuance of the Series 2015A Bonds under the Indenture, with the details and characteristics described herein and in the Authorizing Resolution.

    C. The pledge by Citizens of the Pledged Revenues (as defined in the Indenture) to secure the Series 2015ABonds.

    D. The Master Trust Indenture.

    E. On and after the execution and delivery of the Master Trust Indenture (which shall be no earlier than the Conversion Date), the conversion of the Series2015A Bonds that mature after the Conversion Date from obligations issued and secured under the Indenture to obligations issued and secured under the Master Trust Indenture.

    F. The pledge by Citizens of the Pledged Revenues (as defined in the Master Trust Indenture) to secure the Series 2015ABonds that mature after the Conversion Date.

    DONE and ORDERED this 9th day of April, 2015.

    _/s/_________________________

    Kevin M. McCarty,Commissioner

    Office of Insurance Regulation

     

    NOTICE OFRIGHTS

    Any party to these proceedings adversely affected by this Order is entitled to seek review of this Order pursuant to Section120.68, Florida Statutes, and Rule 9.110, Fla. R. App. P. Review proceedings must be instituted by filing a petitioner notice of appeal with Anoush A.Brangaccio, General Counsel of the Office of Insurance Regulation, acting as theAgency Clerk, at 612 Larson Building, Tallahassee,Florida32399-4206,and a copy of the same with the appropriate district court of appeal, within thirty (30) days of rendition of this Order.

     

    _/s/_____________________________

    Rachic´ A. Wilson,Esq.

    Bar No: 36715

    Assistant General Counsel

    Office of Insurance Regulation

    Division of Legal Services

    200 East Gaines Street

    Tallahassee, Florida 32399-4206

    Telephone: (850)413-4121

    Facsimile: (850)922-2543

     

    **A copy of this order with attachments can be found at: **

    https://finalorders.fldfs.com/ExternalWebAccess.aspx

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