MBI - MBIA Inc.

[valuecfa]

BTIG out with new comments:

 

http://www.btigresearch.com/2013/04/29/mbia-retention-of-weil-gotshal-for-structured-product-unit-rehabilitation-prep-ratchets-up-pressure-on-bofa/

[muscleman]

I sold my MBIA stocks with a tiny profit on Friday and switched to other companies.

I think I should have just bought AGO instead of half AGO and half MBI from the beginning.

 

Right now MBIA is still undervalued even if MBIA Corp. goes into rehabilitation, but not screamingly undervalued.

Right now AGO trades at 40% of adjusted book. MBIA is trading at 40% of National's adjusted book. So probably same upside.

AGO's balance sheet is solid, but still couldn't get AAA rating. Even if MBIA settles with BAC, how long will it take to regain AAA rating to underwrite new business?

 

If MBIA settles with BAC and the stock price stays at $10, I will be a buyer.

If MBIA puts the structured into rehabilitation and stock price drops to $5, I will be a buyer too. I may buy MBIA inc.'s bonds as well if that happens.

[Shawn]

I sold my MBIA stocks with a tiny profit on Friday and switched to other companies.

I think I should have just bought AGO instead of half AGO and half MBI from the beginning.

 

Right now MBIA is still undervalued even if MBIA Corp. goes into rehabilitation, but not screamingly undervalued.

Right now AGO trades at 40% of adjusted book. MBIA is trading at 40% of National's adjusted book. So probably same upside.

AGO's balance sheet is solid, but still couldn't get AAA rating. Even if MBIA settles with BAC, how long will it take to regain AAA rating to underwrite new business?

 

If MBIA settles with BAC and the stock price stays at $10, I will be a buyer.

If MBIA puts the structured into rehabilitation and stock price drops to $5, I will be a buyer too. I may buy MBIA inc.'s bonds as well if that happens.

 

Can you go into some detail about the bonds ?

[muscleman]

I sold my MBIA stocks with a tiny profit on Friday and switched to other companies.

I think I should have just bought AGO instead of half AGO and half MBI from the beginning.

 

Right now MBIA is still undervalued even if MBIA Corp. goes into rehabilitation, but not screamingly undervalued.

Right now AGO trades at 40% of adjusted book. MBIA is trading at 40% of National's adjusted book. So probably same upside.

AGO's balance sheet is solid, but still couldn't get AAA rating. Even if MBIA settles with BAC, how long will it take to regain AAA rating to underwrite new business?

 

If MBIA settles with BAC and the stock price stays at $10, I will be a buyer.

If MBIA puts the structured into rehabilitation and stock price drops to $5, I will be a buyer too. I may buy MBIA inc.'s bonds as well if that happens.

 

Can you go into some detail about the bonds ?

 

Senior notes are trading at 74% of par right now. This ranks higher than the stock, so the risk is lower in a chaotic situation. Bruce Berkowitz's fixed income fund holds a ton of the MBIA inc's bond.

[valuecfa]

I sold my MBIA stocks with a tiny profit on Friday and switched to other companies.

I think I should have just bought AGO instead of half AGO and half MBI from the beginning.

 

Right now MBIA is still undervalued even if MBIA Corp. goes into rehabilitation, but not screamingly undervalued.

Right now AGO trades at 40% of adjusted book. MBIA is trading at 40% of National's adjusted book. So probably same upside.

AGO's balance sheet is solid, but still couldn't get AAA rating. Even if MBIA settles with BAC, how long will it take to regain AAA rating to underwrite new business?

 

 

 

If MBIA settles with BAC and the stock price stays at $10, I will be a buyer.

If MBIA puts the structured into rehabilitation and stock price drops to $5, I will be a buyer too. I may buy MBIA inc.'s bonds as well if that happens.

 

Can you go into some detail about the bonds ?

 

Senior notes are trading at 74% of par right now. This ranks higher than the stock, so the risk is lower in a chaotic situation. Bruce Berkowitz's fixed income fund holds a ton of the MBIA inc's bond.

 

You must be looking at the 34's that are trading at about 77 right now. Even some of the deb's of MBIA Inc is at 88 for 25' maturity.

[muscleman]

I sold my MBIA stocks with a tiny profit on Friday and switched to other companies.

I think I should have just bought AGO instead of half AGO and half MBI from the beginning.

 

Right now MBIA is still undervalued even if MBIA Corp. goes into rehabilitation, but not screamingly undervalued.

Right now AGO trades at 40% of adjusted book. MBIA is trading at 40% of National's adjusted book. So probably same upside.

AGO's balance sheet is solid, but still couldn't get AAA rating. Even if MBIA settles with BAC, how long will it take to regain AAA rating to underwrite new business?

 

 

 

If MBIA settles with BAC and the stock price stays at $10, I will be a buyer.

If MBIA puts the structured into rehabilitation and stock price drops to $5, I will be a buyer too. I may buy MBIA inc.'s bonds as well if that happens.

 

Can you go into some detail about the bonds ?

 

Senior notes are trading at 74% of par right now. This ranks higher than the stock, so the risk is lower in a chaotic situation. Bruce Berkowitz's fixed income fund holds a ton of the MBIA inc's bond.

 

You must be looking at the 34's that are trading at about 77 right now. Even some of the deb's of MBIA Inc is at 88 for 25' maturity.

 

Right... I am new to bonds and I never bought bonds before, so I was reading the tables incorrectly.

Where can I see the rankings of these bonds? Well, I think it is still too early to consider buying bonds right now. The prices is not attractive enough.

[valuecfa]

I sold my MBIA stocks with a tiny profit on Friday and switched to other companies.

I think I should have just bought AGO instead of half AGO and half MBI from the beginning.

 

Right now MBIA is still undervalued even if MBIA Corp. goes into rehabilitation, but not screamingly undervalued.

Right now AGO trades at 40% of adjusted book. MBIA is trading at 40% of National's adjusted book. So probably same upside.

AGO's balance sheet is solid, but still couldn't get AAA rating. Even if MBIA settles with BAC, how long will it take to regain AAA rating to underwrite new business?

 

 

 

If MBIA settles with BAC and the stock price stays at $10, I will be a buyer.

If MBIA puts the structured into rehabilitation and stock price drops to $5, I will be a buyer too. I may buy MBIA inc.'s bonds as well if that happens.

 

Can you go into some detail about the bonds ?

 

Senior notes are trading at 74% of par right now. This ranks higher than the stock, so the risk is lower in a chaotic situation. Bruce Berkowitz's fixed income fund holds a ton of the MBIA inc's bond.

 

You must be looking at the 34's that are trading at about 77 right now. Even some of the deb's of MBIA Inc is at 88 for 25' maturity.

 

Right... I am new to bonds and I never bought bonds before, so I was reading the tables incorrectly.

Where can I see the rankings of these bonds? Well, I think it is still too early to consider buying bonds right now. The prices is not attractive enough.

 

At the end of the 10-k lists the remaining debt, but they bought back a large portion recently 

 

For what it's worth, additional comments:

http://mbibaclitigtion.blogspot.com/2013/04/endgame-settlement-considerations.html

[MYDemaray]

Bransten ruling: https://iapps.courts.state.ny.us/fbem/DocumentDisplayServlet?documentId=tbJ/GmZZrD7hcOGB9QjkUw==&system=prod

[muscleman]

Bransten ruling: https://iapps.courts.state.ny.us/fbem/DocumentDisplayServlet?documentId=tbJ/GmZZrD7hcOGB9QjkUw==&system=prod

 

This is kind of expected, isn't it? Now what? When will the hearing be scheduled to debate the SJ issue? Will article 77 be postponed because of this?

[valuecfa]

Bransten ruling: https://iapps.courts.state.ny.us/fbem/DocumentDisplayServlet?documentId=tbJ/GmZZrD7hcOGB9QjkUw==&system=prod

 

After reading the decision, it seems like a reasoned ruling. I found it very interesting that for practically every issue that was questioned the judge most definitely leaned in MBIA's favor. However, there are enough factual disputes to not grant summary judgement to MBIA at this time.

[muscleman]

Bransten ruling: https://iapps.courts.state.ny.us/fbem/DocumentDisplayServlet?documentId=tbJ/GmZZrD7hcOGB9QjkUw==&system=prod

 

After reading the decision, it seems like a reasoned ruling. I found it very interesting that for practically every issue that was questioned the judge most definitely leaned in MBIA's favor. However, there are enough factual disputes to not grant summary judgement to MBIA at this time.

 

That is correct. Unfortunately time is running out quickly and now it looks increasingly likely that a settlement will not occur in MBIA's favor. I think the most likely outcome is the rehabilitation of MBIA Corp and more chaos, isn't it?

[valuecfa]

Bransten ruling: https://iapps.courts.state.ny.us/fbem/DocumentDisplayServlet?documentId=tbJ/GmZZrD7hcOGB9QjkUw==&system=prod

 

After reading the decision, it seems like a reasoned ruling. I found it very interesting that for practically every issue that was questioned the judge most definitely leaned in MBIA's favor. However, there are enough factual disputes to not grant summary judgement to MBIA at this time.

 

That is correct. Unfortunately time is running out quickly and now it looks increasingly likely that a settlement will not occur in MBIA's favor. I think the most likely outcome is the rehabilitation of MBIA Corp and more chaos, isn't it?

 

Hard to tell what negotiations, or lack there of may be happening.

 

I get the impression that they are still too far apart, and MBIA would rather put the subsidiary into rehab and pursue trial rather than take BAC's $1 billion ballpark offer (that the financial press implies is on the table).

 

The question now seems to be whether or not National or someone else will keep funding the sub's litigation (and as a corollary,  the secured loan for the parent), or whether they put it into rehab on terms that MBIA inc can live with, or whether they will accept a lowball offer. I'm sure MBIA is probably weighing its options and deciding which one is most beneficial to shareholders. I think that time is likely running out too quickly for this to go all the way to trial and a decision rendered without financing.

 

In trying to tree diagram it, it is difficult to judge what the base case scenario is, but i get the impression that base case (only slightly more than other scenarios) is a rehab. Of course, i'm shooting from the hip with this line of thinking.

 

Especially after reading this recent decision, i gather MBIA is by far the odds on favorite to recover all putbacks (including performing loans as was indicated). Time and cash are two precious commodities in this circumstance, and may dictate an alternative route.

[PlanMaestro]

I think the most likely outcome is the rehabilitation of MBIA Corp and more chaos, isn't it?

 

Game of Thrones type of chaos. But I'm confident that Mark Palmer will reaffirm tomorrow that MBIA is the only one true king and that he has dragons.

[valuecfa]

I think the most likely outcome is the rehabilitation of MBIA Corp and more chaos, isn't it?

 

Game of Thrones type of chaos. But I'm confident that Mark Palmer will reaffirm tomorrow that MBIA is the only one true king and that he has dragons.

 

lol . Great analogy. And a great show!

[MYDemaray]

After reading the decision, it seems like a reasoned ruling. I found it very interesting that for practically every issue that was questioned the judge most definitely leaned in MBIA's favor. However, there are enough factual disputes to not grant summary judgement to MBIA at this time.

 

Walked away with the same impression...

[Cardboard]

"The question now seems to be whether or not National or someone else will keep funding the sub's litigation (and as a corollary,  the secured loan for the parent), or whether they put it into rehab on terms that MBIA inc can live with, or whether they will accept a lowball offer."

 

I mentioned about the possibility of financing their effort before and it is one option that I believe not considered at all by Wall Street today. How could that be done most efficiently? These shares should double from here, without too much imagination, if BAC settles for a proper amount and likely more in 2 years from now if BAC loses in court. That is a pretty high rate of return with very favorable risk/reward ratio.

 

It seems to me that just a credible financing threat would be enough for BAC to settle in short order for a reasonable amount. Right now, they are counting on time and the huge negative for MBI Insurance of entering rehab.

 

The other interesting aspect of this judgment release is that none of the party has come out claiming victory. Could it be a sign that they are now negotiating and not trying to undermine the effort?

 

Cardboard

[valuecfa]

"They tried to make Jay go to rehab but he said 'no, no, no'."  :)

 

 

Alex Ryer post that i thought was funny.

[Telluride]

I think the most likely outcome is the rehabilitation of MBIA Corp and more chaos, isn't it?

 

Game of Thrones type of chaos. But I'm confident that Mark Palmer will reaffirm tomorrow that MBIA is the only one true king and that he has dragons.

 

If anything is predictable in this MBIA/BAC saga, its that we can count on BTIG to issue a note by tonight or tomorrow morning affirming that this is truly bad for BAC and will likely force them to settle very soon.

[valuecfa]

I think the most likely outcome is the rehabilitation of MBIA Corp and more chaos, isn't it?

 

Game of Thrones type of chaos. But I'm confident that Mark Palmer will reaffirm tomorrow that MBIA is the only one true king and that he has dragons.

 

Mark Palmer's comments on MBIA's dragons: http://www.btigresearch.com/2013/04/29/mbia-bid-for-summary-judgment-on-successor-liability-denied-but-judge-rules-that-new-york-law-applicable/

 

Some of the highlights snipped out:

 

“After consideration of the relevant factors, MBIA’s de facto merger claim is properly governed by New York law.” This was a huge win for MBIA insofar as the bar for proving that a transaction was a de facto merger is much lower in New York than it is in Delaware, which was the venue for which BAC’s attorneys had argued.

 

she importantly ruled in MBIA’s favor over the question of its “sole remedy.”

 

Additionally, Judge Bransten ruled in MBIA’s favor over the issues of due diligence and justifiable reliance, knocking down BAC’s arguments that the bond insurer should have relied on its own due diligence on the Countrywide loans it insured rather than relying on the bank’s R&Ws.

 

Lawsky may bring both sides to the negotiating table and finally cut a deal.

 

And this one is for you PlanMaestro:

Taken as a whole, we think Judge Bransten’s rulings sent a very strong message to BAC about how difficult it would be for it to win at trial.

 

 

 

 

 

 

 

 

 

[Kraven]

After reading the decision, it seems like a reasoned ruling. I found it very interesting that for practically every issue that was questioned the judge most definitely leaned in MBIA's favor. However, there are enough factual disputes to not grant summary judgement to MBIA at this time.

 

Walked away with the same impression...

 

I quickly skimmed through it.  Things definitely seemed to lean in MBIA's favor, but a summary judgment can't be issued if there is a question of any material fact.  In this case there did seem to be some factual disputes, so she was unable to rule that MBIA (or BAC) was entitled to judgment as a matter of law.  All of this though is just conversation.  At the end of the day BAC has the resources to drag this out.  Unless MBIA gets some financing or just goes ahead and allows the sub to be put into rehab, then they are going to have to ratchet down their expectations.  It would seem at this point as if it made sense (not that it hasn't for a long time) for Lawsky to broker a deal.  Who knows though. 

[MYDemaray]

Agree that Lawsky could be the best thing that happened in this whole saga...the question that remains is whether the inter-company loan was properly secured, or whether it constituted fraudulent conveyence (it's pretty ironic that MBIA is accusing BAC of asset stripping a sub and leaving it with nothing but liabilities...when that's basically what they've done with their structured products division...except the stripped the cash assets via a senior loan).

[Kraven]

Agree that Lawsky could be the best thing that happened in this whole saga...the question that remains is whether the inter-company loan was properly secured, or whether it constituted fraudulent conveyence (it's pretty ironic that MBIA is accusing BAC of asset stripping a sub and leaving it with nothing but liabilities...when that's basically what they've done with their structured products division...except the stripped the cash assets via a senior loan).

 

It's all very interesting.  I have a hard time seeing how it could have been a fraudulent conveyance.  A fraudulent conveyance usually revolves around the state of the company at the point in time when the transaction occurred.  I think the error people make is looking at the situation today and applying that to the analysis.  It needs to be what was the situation then.  Was there an intent to avoid debts?  Were there even debts at the time?  It's a very factually based analysis.  But the fact that today things look shaky may or may not have any bearing on the result.  If it does then arguably any company that moves assets around and gets into any kind of "foreseeable" trouble years down the road has engaged in a fradulent conveyance.  That's not really how it works.  There's usually time limit parameters so that there is certainty in things.  But who knows what can happen in court.

[MYDemaray]

You're right...clearly the intent was to fund the litigation at the time the loan was made, not the drain the company of cash.  On that basis, they are probably fine.

[PlanMaestro]

But if my memory serves me right, they were already being sued on 78 and fraudulent conveyance before the loan. So there were real questions of MBIA's financial viability and actions. Would that be something to build on Kraven?

[Kraven]

But if my memory serves me right, they were already being sued on 78 and fraudulent conveyance before the loan. So there were real questions of MBIA's financial viability and actions. Would that be something to build on Kraven?

 

Honestly at this point I am not sure I have the sequence of events straight in my head.  I'd have to go back and refresh my memory.  There was the restructuring, the loan, etc.  To me, the overarching point is one of timing.  A fraudulent conveyance is a transfer of property with the intent to avoid debt or some kind of obligation.  There has to be intent essentially to defraud someone.  That's a tall order to prove. 

 

But in terms of timing, these things don't last forever.  That is, if I assign some property to you and in 5 years have debt trouble, I think that most people would say that the two things have nothing to do with each other.  Yet, here, there seems to be a sense that these transactions are all one and the same.  I don't get it.  Someone could argue that, well, they knew they had these obligations and that it's forseeable that they could have problems down the line.  But it really doesn't work that way.  They had the ability at the time (presumably) to make good on their debts and obligations as they existed then.  There is no requirement I am aware of that requires a party to contemplate any possible obligation they might ever have and be responsible for that (from a fradulent conveyance standpoint) for years and years.

 

After rambling a bit, I think the short answer is that while I don't know, I don't believe the mere existence of lawsuits at the time should affect the analysis in any way.  It is a very fact specific analysis.  Did MBIA do x, y and z with the intent to put assets beyond the reach of creditors or other parties they owed obligations to?  So 4-5 years ago, who was a creditor?  Who did they owe an obligation to?  Given that it's still unclear what they might owe today, I don't see how 4-5 years ago it could have been done with an intent to defraud.