College Construction Loan Insurance Association (CCLIA)

What Was the College Construction Loan Insurance Association (CCLIA)?

The College Construction Loan Insurance Association (CCLIA), nicknamed Connie Lee, was a government-sponsored enterprise (GSE) made by the Higher Education Amendments of 1986. Connie Lee's purpose was to give insurance to construction projects attempted by universities, colleges, showing hospitals, and other educational institutions. It was privatized in 1997.

From October 1991 — when it insured its first bond — through September 1995, Connie Lee insured 95 bonds adding up to about $2.6 billion. Many were for generally black colleges and universities. It stayed in sound financial shape all through its short life.

How CCLIA Worked

Connie Lee gave backing to the debt instruments educational institutions would issue to assist with funding new or revamped structures and facilities. Technically a for-benefit bond insurance holding company, authorized by federal statute, it for the most part insured municipal bonds issued by schools whose debt had moderately low credit ratings — Standard and Poor's ratings of BBB and below.

The Department of Education furnished Connie Lee with fire up equity capital when it was incorporated in 1987. In any case, all along, the enterprise was discovered between two clashing orders. Federal law generally limited it to protecting bonds that were greater credit risks: a rating of BBB or below. Nonetheless, state laws compelled bond insurance companies like Connie Lee to have a predefined percentage of their business — frequently as much as 95% — in investment-grade categories of debt: bonds rated BBB or more.

Moreover, numerous institutions of higher education didn't have to issue bonds or get bond insurance to finance projects, depending on endowments, graduated class gifts, or other federal sources all things considered.

Thus, albeit authorized to operate in 49 states, the District of Columbia, and

Puerto Rico, Connie Lee ended up having the option to serve a fairly narrow number of schools. After the Higher Education Amendments of 1992, protecting higher-level debt, broadening its reach somewhat was allowed.

Privatization of Connie Lee (CCLIA)

By June 1995, talks were in progress to take Connie Lee private, and a Congressional bill, the College Construction Loan Insurance Association Privatization Act of 1995, was passed, ending its federal sponsorship.

In November 1997, Reuters reported that bond insurer Ambac Financial Group paid $106 million for the outstanding shares of Connie Lee. As indicated by news reports at that point, Connie Lee's biggest shareholders were Sallie Mae, with 42% of its stock, and the Pennsylvania Public School Employees Retirement System, at almost 23%. Ambac likewise paid down $18.4 million in debt that Connie Lee incurred when it bought back the 14% stake the U.S. Treasury Department had in it.

The acquisition came after a period of speculation during which Connie Lee hung tight for a buyer and new leadership. The company's founding president and CEO Oliver Sockwell had retired before in the year. Ambac renamed its new subsidiary the Connie Lee Insurance Company. In any case, it stayed dormant, composing no new insurance policies for a really long time.

In 2008, Ambac received regulatory endorsement to capitalize and reactivate Connie Lee, pulling together it on college and hospital infrastructure projects with an injection of $850 million in capital. A significant part of the public debt that was financed has been in run-off. This means that the insurance company will allow the existing bonds to mature, however no new issues will be generated.

Connie Lee and Other Government-Sponsored Enterprises

In being alluded to as Connie Lee, the College Construction Loan Insurance Association was following a similar scheme as other government-sponsored enterprises (GSEs), like Sallie Mae (initially named the Student Loan Marketing Association), Fannie Mae (the Federal National Mortgage Association), and Freddie Mac (the Federal Home Loan Mortgage Corp). They are abbreviations that are embodied into relatable, memorable names for these financial service corporations shaped by Congress to grow credit across the economy.

Features

• Connie Lee's purpose was to give insurance to construction projects attempted by universities, colleges, and educating hospitals.
• The College Construction Loan Insurance Association, nicknamed Connie Lee, was a government-sponsored enterprise.
• The Department of Education gave Connie Lee beginning up equity capital when it was incorporated in 1987, yet Connie Lee generally found itself in the middle of between clashing federal and state laws on safeguarding bonds.
• Connie Lee gave backing to bonds issued by educational institutions to assist with funding new or revamped structures and facilities.
• Connie Lee was privatized when Ambac Financial Group paid $106 million for the outstanding shares.