MBI - MBIA Inc.

[JRH]

Anyhow, this means MBI will take the charge in Q1 too.

 

I'm often right for the wrong reason, but I'll take it.

 

Well, I'm still confused about the earnings release - the settlement announcement made it sound like they were delaying the conference call but did not mention the earnings release itself.  So, MBIA has a two-day window to reconcile the settlement to the Q1 financials AND get an auditor's stamp on it?

[valuecfa]

I called IR and they said they have not yet determined which Q they will report it on yet, and that info is currently nonpublic if the made up there mind already. They said there will be a press release soon

[Kraven]

MBIA Inc. Investor Conference Call to Discuss First Quarter 2013 Financial Results Scheduled for Friday, May 10, at 8:00 A.M. Eastern Time

 

 

ARMONK, N.Y.--(BUSINESS WIRE)-- MBIA Inc. (NYSE: MBI) will host a webcast and conference call for investors on Friday, May 10, at 8:00 a.m. (EDT) to discuss its first quarter 2013 financial results and other issues related to the Company. The dial-in number for the call is (877) 694-4769 in the U.S. and (404) 665-9935 from outside the U.S. The conference call code is 57164744.

 

The conference call will consist of brief comments on the first quarter 2013 results followed by a question and answer session for investors. MBIA's first quarter financial results press release will be issued and its first quarter Operating Supplement will be posted on the Company's website, www.mbia.com, prior to the start of the conference call.

 

A replay of the call will be available approximately two hours after the completion of the call on May 10 until 11:59 p.m. on May 24 by dialing (800) 585-8367 in the U.S. or (404) 537-3406 from outside the U.S. The replay call code is also 57164744. In addition, a recording of the call will be available on the Company's website approximately two hours after the completion of the call.

 

MBIA Inc., headquartered in Armonk, New York is a holding company whose subsidiaries provide financial guarantee insurance, as well as related reinsurance, advisory and portfolio services, for the public and structured finance markets, and asset management advisory services. The Company services its clients around the globe with offices in New York, Denver, San Francisco, Paris, London, Madrid and Mexico City. Please visit MBIA's Web site at www.mbia.com.

 

 

 

MBIA Inc.

Greg Diamond, 914-765-3190

greg.diamond@mbia.com

 

Source: MBIA Inc.

 

[ERICOPOLY]

Congrats to everyone on the board.. i've only started to read the first few pages a few days ago and missed this one..

 

Ericopoly -> did you supplement your common share purchases with leaps/options? btw, nice timing

 

No, I didn't like the premiums -- too high.  Today I've been writing puts as well as far out of the money covered calls because I believe the volatility premiums are going south very quickly with the settlement in the rear window.  Gather ye rosebuds while ye may.

 

Today the stock rose but the calls were declining rapidly as implied volatility plunges.  These are for June expiry:

 

mbivol.tiff

[vpagano]

Apparently MBIA just settled with Soc. Gen. for $350 Million:

 

http://www.theflyonthewall.com/permalinks/entry.php/MBI;SCGLYid1829981/MBI;SCGLY-MBIA-to-pay-M-to-settle-legal-dispute-with-Societe-Generale-DJ-reports

[valuecfa]

Apparently MBIA just settled with Soc. Gen. for $350 Million:

 

http://www.theflyonthewall.com/permalinks/entry.php/MBI;SCGLYid1829981/MBI;SCGLY-MBIA-to-pay-M-to-settle-legal-dispute-with-Societe-Generale-DJ-reports

 

I had a feeling this was going to come real soon after bac. Glad to put the challenge of the split behind us. Time to resume upward trend.

[merkhet]

I hope to see Jay Brown hammering the point home that National should now have a AAA rating given that all of this crap is behind them...

[valueorama]

I hope to see Jay Brown hammering the point home that National should now have a AAA rating given that all of this crap is behind them...

 

Before SocGen settlement was announced. S&P upgraded ratings here there are

1. MBIA Inc is B

2. MBIA Copr is B

3. National is now A. All the ratings are subject to BAC settlement (closing).

 

So, still no AAA on National. It looks like Shitco needs to be spin-off to get a AAA rating.

[merkhet]

If the S&P upgraded the ratings prior to the SocGen announcement, it's likely they'll have to revise again now that the National litigation is completely settled.

 

(And I thought they just put the ratings on watch rather than actually upgrading them...)

[valuecfa]

This should be one hell of an interesting conference call to listen to. It's kind of funny how the market doesn't know how to value this company still.  Hopefully, after the conference call people will begin to understand how cheap it is.

[valuecfa]

The Wall Street Journal reported that MBIA Insurance Corp. will use $150mm from its United Kingdom subsidiary to fund the settlement with SocGen, and it will not draw on the $500mm line of credit that BAC provided the unit as part of the settlement. This is an important point now that investors have sharpened their pencils to try to calculate the value of the structured-product insurance unit.

 

 

 

 

[Liberty]

This should be one hell of an interesting conference call to listen to. It's kind of funny how the market doesn't know how to value this company still.  Hopefully, after the conference call people will begin to understand how cheap it is.

 

What's your current estimate of IV for MBIA, if I may ask?

[valuecfa]

This should be one hell of an interesting conference call to listen to. It's kind of funny how the market doesn't know how to value this company still.  Hopefully, after the conference call people will begin to understand how cheap it is.

 

What's your current estimate of IV for MBIA, if I may ask?

 

Quite a bit higher than current price. I will have to see what value is left at ins corp subsidiary (and slap an estimate figure on remaining litigation in which MBIA is plaintiff). But even if you give it a zero value, you can easily lookup the adjusted book value of National.  I think that the conference call, and hopefully the financials, (if they are inclusive of recent settlements in Q1) will clear up most, if not all, the remaining confusion...and make this company much easier for the market to value.

 

Now that the majority of major settlements have cleared, i think the next catalyst may be clarity that will come from an update of how the financials are resolved on the balance sheet, post all this mess. Of course, other settlements with Rescap, JPM, CS etc are another catalyst, but those may take more time.

[prunes]

I think MBI would make a good case study in investor psychology. Valuecfa you started this thread nearly two and a half years ago. Good on you seeing it through. There was some gutwrenching volatility. I know I didn't have the confidence to buy when shares fell to $5, and my basis was mid 9s. I was nearly ready to substantially reduce my position last week...luckily procrastination paid off.

 

Meanwhile you have someone like Berkowitz who goes on WealthTrack, and when pressed the #1 security he'd recommend to a retail investor is MBI, he raises a new fund to invest 30% of its capital in it, and he can't stick it through--sells literally days before the big payoff. Anyone know whether that guy from Sabertooth who presented the idea at Ira Sohn held his shares?

 

Valuecfa any thoughts you can provide to the above would be very valuable.

[bmichaud]

Awhile back I looked at where MBI and AGO traded relative to book leading up to the financial crisis - if I'm not mistaken, neither company actually ever traded in line with ABV and the closest they came was in the credit bubble of 2007. I need to double check tomorrow, but if this is the case, does this bother the MBI bulls for value realization from here?

 

Also - I'm curious how the muni market made it through the last 6 years without MBI ratings, if in fact those ratings are so vital. Had issuance been down? Are munis chomping at the bit with pent up demand?

[Liberty]

The 25-year MBIA 11.54 percent bond, maturing in January 2033 rose on Wednesday to 78 cents to the dollar from 26 cents to the dollar on Monday.

 

http://www.reuters.com/article/2013/05/09/us-ratings-mbia-sandp-idUSBRE94800320130509

[berkshiremystery]

David Einhorn has closed out his MBIA short position in the 1st qtr. Einhorn's decision to close out the short came a few weeks before the deal with BofA. So it seems for him that the darkest clouds have moved away over MBIA and there were only dangerous shorting it any longer against our Eric ;)

 

http://finance.yahoo.com/news/greenlight-capital-exits-profitable-mbia-135404642.html

 

[Liberty]

Question for the MBIA experts:

 

What are the main things you'll be wanting to hear about in tomorrow morning's call?

 

I'm thinking of listening in, and I'd love a cheat sheet  :D

 

Is it too early to hope to hear about plans to write new business at National? Something on the value of the structured business? Something on credit ratings?  Anything else?

 

Thanks.

[valueorama]

The 25-year MBIA 11.54 percent bond, maturing in January 2033 rose on Wednesday to 78 cents to the dollar from 26 cents to the dollar on Monday.

 

http://www.reuters.com/article/2013/05/09/us-ratings-mbia-sandp-idUSBRE94800320130509

Hmm. Mr.Chou was talking exactly about this situation recently i think. yes MBIA equity was cheap but one would have been wiser/richer to look at where the various pieces of  capital structure was priced.

 

Even though i read that article. I did quickly forget it. :-[ :'(

[Cardboard]

I am no expert but, I would love to hear about plans to spinoff National from ShitCo.

 

If they want to make National AAA rated quickly to write new muni insurance, then I would imagine that they need to remove completely this possibility of having to fund anything in the future at MBIA Insurance Corp. No intercompany loan, no guarantee, it needs to be clean and simple.

 

It probably is way too early to think about that, but looking at the financial statements of this company makes my head spin. It would be much easier to understand and for the Street to value if both entities were separated. One issue is that BAC may have some provision in their warrants preventing a spinoff and with their insurance on RMBS still in force at ShitCo, they would want it capable to pay its bills.

 

Anyway, some simplification would sure be nice.

 

Cardboard

[compoundinglife]

The 25-year MBIA 11.54 percent bond, maturing in January 2033 rose on Wednesday to 78 cents to the dollar from 26 cents to the dollar on Monday.

 

http://www.reuters.com/article/2013/05/09/us-ratings-mbia-sandp-idUSBRE94800320130509

Hmm. Mr.Chou was talking exactly about this situation recently i think. yes MBIA equity was cheap but one would have been wiser/richer to look at where the various pieces of  capital structure was priced.

 

Even though i read that article. I did quickly forget it. :-[ :'(

 

Yeah I saw his presentation in Toronto and promptly kicked myself this week for not looking at MBIA's debt. Doh.

[txlaw]

Q1 report is out:

 

http://www.sec.gov/Archives/edgar/data/814585/000115752313002576/a50629540ex99_1.htm

[valuecfa]

I think MBI would make a good case study in investor psychology. Valuecfa you started this thread nearly two and a half years ago. Good on you seeing it through. There was some gutwrenching volatility. I know I didn't have the confidence to buy when shares fell to $5, and my basis was mid 9s. I was nearly ready to substantially reduce my position last week...luckily procrastination paid off.

 

Meanwhile you have someone like Berkowitz who goes on WealthTrack, and when pressed the #1 security he'd recommend to a retail investor is MBI, he raises a new fund to invest 30% of its capital in it, and he can't stick it through--sells literally days before the big payoff. Anyone know whether that guy from Sabertooth who presented the idea at Ira Sohn held his shares?

 

Valuecfa any thoughts you can provide to the above would be very valuable.

 

I think it all comes down to knowing what you are doing. It's the only way you will have complete confidence in your decisions. If you can't interpret accounting, financial statements and sec filings, and the general business of the company your invested in, then your emotions will take over at some point.

 

If you follow Berkowitz, Watsa,  or whoever into an investment and they sell, do you sell? Do you sell when an analyst or the media reports negatively? If you don't "really" understand what you are doing then you are bound to be emotional about the investment and you have to rely on the advice of others that may or may not know what they are doing. The margin of safety is knowing what you are doing. Can you make mistakes in calculations? Sure, but at least you are doing it the right way.

 

Take a company like Sandridge. 

Despite trying to learn, and reading several books on valuing a company like this, i know very little about the business, geology, economics of a Nat Gas/Oil company to a detail i would feel comfortable with. I can interpret many of the numbers (though many i can't). I know how some of them flow through the financials based on difference circumstances, how the hedging works when you view the instruments on financial statements, some of the economics of the business, common valuation metrics like pv-10, etc but i doubt most if not all can understand all the pieces of a company like this. Myself included. I know just enough about a company like Sandridge to do something stupid. If i decide to invest in it, i would be doing it somewhat blindly based on the talent of the HW team. Not a position i am comfortable with, though i have done this many times in the past, and i am trying to do less of it in the future. You can usually tell pretty quickly when people don't really understand what they are talking about and just focus on key words from a press release, shareholder letter, conference call, or investor presentation.

[HJ]

Awhile back I looked at where MBI and AGO traded relative to book leading up to the financial crisis - if I'm not mistaken, neither company actually ever traded in line with ABV and the closest they came was in the credit bubble of 2007. I need to double check tomorrow, but if this is the case, does this bother the MBI bulls for value realization from here?

 

Also - I'm curious how the muni market made it through the last 6 years without MBI ratings, if in fact those ratings are so vital. Had issuance been down? Are munis chomping at the bit with pent up demand?

 

That's the 64k question.  The crisis has put the entire business model of bond insurance into question.  Even Berkshire is not a AAA rated entity anymore.  I doubt an unencumbered National would be rated there either.  When you look at the notional amount of bonds that are insured versus the capital base of AGO or National, one quickly starts to question the value of this insurance.  These guys are literally leveraged 100:1.  Compounded by the fact that through the ordeals of mortgage put back litigations, the borrowers are also becoming reluctant to include them in the bond indentures, which would give them special rights in an event of default.  Assured has stated that increasing amount of their business is in the secondary market, where they don't get any special rights versus any other investors.  It seem to me that underwriters and borrowers are excluding them from the deal documentations for a reason.

 

From the investors perspective, they don't add much for an institutional investor, but do add some value to the retail investors, particularly when a deal starts to become troubled.  But I'm not sured if they are getting compensated enough.  I think follow through the cases of Jefferson County Sewage and Stockton in terms of how those cases are resolved, together with your own assessment of how many municipalities in their portfolio would need to go through this process, will help with understanding their business prospects looking forward.  It's one thing to get beyond liquidity/solvency issues, another thing to evaluate type of premium, if any, they deserve to trade above book. 

 

On the other hand, as suggested by Wilbur Ross, Assured is the one investment in his portfolio that has the greatest upside leverage...

[valuecfa]

Awhile back I looked at where MBI and AGO traded relative to book leading up to the financial crisis - if I'm not mistaken, neither company actually ever traded in line with ABV and the closest they came was in the credit bubble of 2007. I need to double check tomorrow, but if this is the case, does this bother the MBI bulls for value realization from here?

 

Also - I'm curious how the muni market made it through the last 6 years without MBI ratings, if in fact those ratings are so vital. Had issuance been down? Are munis chomping at the bit with pent up demand?

 

That's the 64k question.  The crisis has put the entire business model of bond insurance into question.  Even Berkshire is not a AAA rated entity anymore.  I doubt an unencumbered National would be rated there either.  When you look at the notional amount of bonds that are insured versus the capital base of AGO or National, one quickly starts to question the value of this insurance.  These guys are literally leveraged 100:1.  Compounded by the fact that through the ordeals of mortgage put back litigations, the borrowers are also becoming reluctant to include them in the bond indentures, which would give them special rights in an event of default.  Assured has stated that increasing amount of their business is in the secondary market, where they don't get any special rights versus any other investors.  It seem to me that underwriters and borrowers are excluding them from the deal documentations for a reason.

 

From the investors perspective, they don't add much for an institutional investor, but do add some value to the retail investors, particularly when a deal starts to become troubled.  But I'm not sured if they are getting compensated enough.  I think follow through the cases of Jefferson County Sewage and Stockton in terms of how those cases are resolved, together with your own assessment of how many municipalities in their portfolio would need to go through this process, will help with understanding their business prospects looking forward.  It's one thing to get beyond liquidity/solvency issues, another thing to evaluate type of premium, if any, they deserve to trade above book. 

 

On the other hand, as suggested by Wilbur Ross, Assured is the one investment in his portfolio that has the greatest upside leverage...

 

I think it all boils down to would you rather have the insurance, or not have it?

 

I've bought hundreds of millions in munis for my firm's clients, over the past year. I get at least 10 calls and countless emails a day from different dealers pitching their issues. I feel like i have a decent feel for the market and how it works now.

 

The vast majority of bond dealers and the purchasers on the other end of the phone/computer only talk about the credit rating, if its callable or a bullet, whether it is a GO or Rev, and if its a rev whether its insured...,what industry of muni it is, what the maturity and call dates are, the premium, and what YTW is and what the YTM is. A quick snapshot. Rarely does anyone even look at the Official Statement or any other continuing disclosures of the bond itself. Most buyers don't even look over the trading history of the bond before pulling the trigger.

 

(I certainly don't do this, but)-In fact you will find that many financial firms will even pass on the highest bid when selling a bond, b/c the dealer took you to a ball game, the strip club, or lunch one day. You ask for a bid request on a bond, despite their bid being 10 basis points light they get the business as a return of the favor. It happens every day at many of the largest firms all over the world...this is not really of relevance to this thread but it irks me.

 

Most buyers have limitations on buying only A rated or higher too for example. It really depends on the investment policy statement of the pension fund, charitable organization, or general client. The rating is everything in the bond world, whether the rating is well reasoned or not is another matter than sadly never comes into the typical conversation between the bond dealers and buyers. Part of the reason is that there is just not enough time in the day to analyze every muni bond purchased in great detail.

 

The rating is everything, and if MBIA can bump it higher or provide the extra comfort of the insurance it definitely has value. Will the muni market function without it? Sure. But it's an extra warm blanket that people do look for and pay extra for.

 

-(And again to be clear, me and my team do not practice the above mentioned behavior and lack of diligence, but it is well known that it is very common throughout the financial world. In fact, it is probably closer to the norm.) It's for reasons like this how BAC, Goldman, and the like have something like 360 profitable trading days out of the year.