MBI - MBIA Inc.

[sampr01]

on Twitter -  "Major stakeholders" have "signed" an agreement laying out a "global settlement" and Ch11 plan.

$ALLY will pay $MBI

 

Rescap settlement rumor

[sampr01]

http://www.marketwatch.com/story/ally-financial-enters-comprehensive-settlement-to-resolve-rescap-related-matters-2013-05-14

 

The parties to the comprehensive settlement include: Ally and its consolidated subsidiaries, ResCap and its affiliated debtor entities, the official committee of unsecured creditors, AIG Asset Management (U.S.), LLC, Allstate Insurance Company, Financial Guaranty Insurance Company, which intends to execute the agreement pending regulatory approval, counsel to the putative class of persons represented in the consolidated class action entitled In re: Community Bank of Northern Virginia Second Mortgage Lending Practice Litigation, filed in the United States District Court for the Western District of Pennsylvania, MDL No. 1674, Case Nos. 03-0425, 02-01201, 05-0688, 05-1386, Massachusetts Mutual Life Insurance Company, MBIA Insurance Corporation, Paulson & Co. Inc., a holder of Senior Unsecured Notes issued by ResCap, Prudential Insurance Company of America, certain investors in RMBS backed by mortgage loans held by securitization trusts associated with securitizations sponsored by the Debtors between 2004 and 2007 represented by Kathy Patrick of Gibbs & Bruns LLP and Keith H. Wofford of Ropes & Gray LLP, Talcott Franklin of Talcott Franklin, P.C. as counsel for certain RMBS investors, Wilmington Trust, National Association in its capacity as Indenture Trustee for the Senior Unsecured Notes,

[valuecfa]

With a rescap settlement seemingly in the bag that is inline with mgmt estimates i'm surprised the price/share has declined of late...getting close to my reentry point.

[muscleman]

With a rescap settlement seemingly in the bag that is inline with mgmt estimates i'm surprised the price/share has declined of late...getting close to my reentry point.

 

Now investors will worry when the ratings will get back to AAA, or if it will get there at all. They will also worry when the muni crisis will end. I think as long as the news keeps flowing about Stockton and Detroit and Harrisburg, MBIA will likely stay low for a while longer, which isn't necessarily a bad thing :)

 

I am curious what is your view on the muni crisis? As pointed out by the other members, the default rate could be quite different if there is no muni insurer vs there is muni insurer, but also other members pointed to a research paper that says well secured munis usually perform well, such as General Obligations.

 

I think it is perhaps inaccurate to call it muni crisis, because some random analyst predicted this crisis since 2011 but the number of bankruptcies still looks manageable to me.

[valuecfa]

With a rescap settlement seemingly in the bag that is inline with mgmt estimates i'm surprised the price/share has declined of late...getting close to my reentry point.

 

Now investors will worry when the ratings will get back to AAA, or if it will get there at all. They will also worry when the muni crisis will end. I think as long as the news keeps flowing about Stockton and Detroit and Harrisburg, MBIA will likely stay low for a while longer, which isn't necessarily a bad thing :)

 

I am curious what is your view on the muni crisis? As pointed out by the other members, the default rate could be quite different if there is no muni insurer vs there is muni insurer, but also other members pointed to a research paper that says well secured munis usually perform well, such as General Obligations.

 

I think it is perhaps inaccurate to call it muni crisis, because some random analyst predicted this crisis since 2011 but the number of bankruptcies still looks manageable to me.

 

I'd forget about a AAA. That's not gonna happen, and i don't think it would be cost effective to raise enough capital to make it happen. Under the new rating methodology, it's practically impossible...not even the US is AAA on S&P. As far as the muni "crisis", no doubt defaults will grow, but the headline numbers severely exaggerate the exposure. It's very manageable, especially for MBIA relative to peers.

[sampr01]

Hi Valuecfa

 

Do you know when ResCap file settlement in court? or when we will get more info on settlement. Thanks

With a rescap settlement seemingly in the bag that is inline with mgmt estimates i'm surprised the price/share has declined of late...getting close to my reentry point.

 

Now investors will worry when the ratings will get back to AAA, or if it will get there at all. They will also worry when the muni crisis will end. I think as long as the news keeps flowing about Stockton and Detroit and Harrisburg, MBIA will likely stay low for a while longer, which isn't necessarily a bad thing :)

 

I am curious what is your view on the muni crisis? As pointed out by the other members, the default rate could be quite different if there is no muni insurer vs there is muni insurer, but also other members pointed to a research paper that says well secured munis usually perform well, such as General Obligations.

 

I think it is perhaps inaccurate to call it muni crisis, because some random analyst predicted this crisis since 2011 but the number of bankruptcies still looks manageable to me.

 

I'd forget about a AAA. That's not gonna happen, and i don't think it would be cost effective to raise enough capital to make it happen. Under the new rating methodology, it's practically impossible...not even the US is AAA on S&P. As far as the muni "crisis", no doubt defaults will grow, but the headline numbers severely exaggerate the exposure. It's very manageable, especially for MBIA relative to peers.

[valuecfa]

Apparently Moody's doesn't think too highly of MBI, with weaker than expected upgrades

[mankap]

MBI to get $600m from REscap settlement.

 

 

 

Ally Financial takes another step towards an IPO as it agrees to pay $2.1B towards the settlement of the ResCap bankruptcy. The move, says Ally, essentially removes the threat it would have to pay billions more in private claims related to its subprime mortgage arm. It's also a victory for MBIA (MBI), whose share of the proceeds could be $600M, according to hedge funder Manal Mehta (he's long).

[no_free_lunch]

I wonder if any of the MBI holders on the board have looked at Ambac (AMBC)?  It just emerged out of bankruptcy, extinguishing 1.7B in debt during the process.  The company is still basically worth nothing but with the MBI process going the way it has there is potential for incredible upside.  They are sitting on $6B in loan losses which can perhaps be reduced via lawsuits.  They have I think $5B in NOLs.  They also still have about $2.5 B in unearned premiums.  All this for a stock with about $1.2B market cap. 

[muscleman]

I wonder if any of the MBI holders on the board have looked at Ambac (AMBC)?  It just emerged out of bankruptcy, extinguishing 1.7B in debt during the process.  The company is still basically worth nothing but with the MBI process going the way it has there is potential for incredible upside.  They are sitting on $6B in loan losses which can perhaps be reduced via lawsuits.  They have I think $5B in NOLs.  They also still have about $2.5 B in unearned premiums.  All this for a stock with about $1.2B market cap.

 

This is definitely interesting. Thanks for the tip! I will take a dive into it. :)

How will the unearned premiums eventually go into the book value? In other words, what is their adjusted book value?

[no_free_lunch]

Let me be upfront and just say that I don't fully understand the unearned premiums or the majority of the financials for that matter.  That is why I am hoping for someone on the board's opinion.  :)

 

I did some more digging to try to answer your question and I just can't make sense out of it.  There is the 2.6B unearned premiums, but I guess there is also $1.5B premium receivables.  I am not sure if those are related or not.  I know that some premiums are paid up front and I believe would show up as the unearned premium liabilty.  There are also premiums which are paid in installments, which might be the premium receivables. 

 

At any rate, I think the premiums are just icing, for the investment to payoff it will depend on how much they can reduce the $6.5 B in loan losses by.  I think they need about $2.5B just to get to level, and then it starts accruing to tangible book.   

 

There is also the possibility for new business, at some point in the future.  That is where the NOLs would seem to really add value.

 

My basic thesis is that the premiums will continue to come in for years and together with interest will not only keep the lights on but generate some income.  We are not talking an insubstantial amount either relative to their size.  Last quarter there was $100M premiums earned + $85M interest earned, less $34M operating and $23M interest expense.  If they can reduce their losses and get to positive book, with the NOLs what would it be worth?

 

If you are interested in the idea, there are also warrants available with what appears to be a dilution adjustment.  The warrants strike at $16.67 in 2023 (or earlier if you like) and are under AMBCW.  Based on the option calculator I found on the internet they appear to be a touch on the cheap side given reasonable volatility adjustments.

[muscleman]

Let me be upfront and just say that I don't fully understand the unearned premiums or the majority of the financials for that matter.  That is why I am hoping for someone on the board's opinion.  :)

 

I did some more digging to try to answer your question and I just can't make sense out of it.  There is the 2.6B unearned premiums, but I guess there is also $1.5B premium receivables.  I am not sure if those are related or not.  I know that some premiums are paid up front and I believe would show up as the unearned premium liabilty.  There are also premiums which are paid in installments, which might be the premium receivables. 

 

At any rate, I think the premiums are just icing, for the investment to payoff it will depend on how much they can reduce the $6.5 B in loan losses by.  I think they need about $2.5B just to get to level, and then it starts accruing to tangible book.   

 

There is also the possibility for new business, at some point in the future.  That is where the NOLs would seem to really add value.

 

My basic thesis is that the premiums will continue to come in for years and together with interest will not only keep the lights on but generate some income.  We are not talking an insubstantial amount either relative to their size.  Last quarter there was $100M premiums earned + $85M interest earned, less $34M operating and $23M interest expense.  If they can reduce their losses and get to positive book, with the NOLs what would it be worth?

 

If you are interested in the idea, there are also warrants available with what appears to be a dilution adjustment.  The warrants strike at $16.67 in 2023 (or earlier if you like) and are under AMBCW.  Based on the option calculator I found on the internet they appear to be a touch on the cheap side given reasonable volatility adjustments.

 

Thank you very much! I guess I need to check their books and see how many are general obligations, what is their leverage ratio to have a sense of how risky it is. I hope valuecfa could add some input.

 

From their 10-Q:

http://google.brand.edgar-online.com/displayfilinginfo.aspx?FilingID=9298630-907-506841&type=sect&TabIndex=2&companyid=7342&ppu=%252fdefault.aspx%253fsym%253dAMBC

 

EPS per share was 0.93 last quarter, so in terms of PE, this is cheap. But book value is minus 2.8 bn? That is a concern. If they recover 66% of the 6.5 bn, then they could make the book value 1.2 bn, which is exactly today's market cap. In terms of price/book, this seems risky and not cheap.

 

[yitech]

Let me be upfront and just say that I don't fully understand the unearned premiums or the majority of the financials for that matter.  That is why I am hoping for someone on the board's opinion.  :)

 

I did some more digging to try to answer your question and I just can't make sense out of it.  There is the 2.6B unearned premiums, but I guess there is also $1.5B premium receivables.  I am not sure if those are related or not.  I know that some premiums are paid up front and I believe would show up as the unearned premium liabilty.  There are also premiums which are paid in installments, which might be the premium receivables. 

 

At any rate, I think the premiums are just icing, for the investment to payoff it will depend on how much they can reduce the $6.5 B in loan losses by.  I think they need about $2.5B just to get to level, and then it starts accruing to tangible book.   

 

There is also the possibility for new business, at some point in the future.  That is where the NOLs would seem to really add value.

 

My basic thesis is that the premiums will continue to come in for years and together with interest will not only keep the lights on but generate some income.  We are not talking an insubstantial amount either relative to their size.  Last quarter there was $100M premiums earned + $85M interest earned, less $34M operating and $23M interest expense.  If they can reduce their losses and get to positive book, with the NOLs what would it be worth?

 

If you are interested in the idea, there are also warrants available with what appears to be a dilution adjustment.  The warrants strike at $16.67 in 2023 (or earlier if you like) and are under AMBCW.  Based on the option calculator I found on the internet they appear to be a touch on the cheap side given reasonable volatility adjustments.

 

Thank you very much! I guess I need to check their books and see how many are general obligations, what is their leverage ratio to have a sense of how risky it is. I hope valuecfa could add some input.

 

From their 10-Q:

http://google.brand.edgar-online.com/displayfilinginfo.aspx?FilingID=9298630-907-506841&type=sect&TabIndex=2&companyid=7342&ppu=%252fdefault.aspx%253fsym%253dAMBC

 

EPS per share was 0.93 last quarter, so in terms of PE, this is cheap. But book value is minus 2.8 bn? That is a concern. If they recover 66% of the 6.5 bn, then they could make the book value 1.2 bn, which is exactly today's market cap. In terms of price/book, this seems risky and not cheap.

 

Check out P. 57. You will see the Pro-Forma Fresh Start Consolidated Balance Sheet post-bankruptcy. The equity is actually $408M.

[muscleman]

Let me be upfront and just say that I don't fully understand the unearned premiums or the majority of the financials for that matter.  That is why I am hoping for someone on the board's opinion.  :)

 

I did some more digging to try to answer your question and I just can't make sense out of it.  There is the 2.6B unearned premiums, but I guess there is also $1.5B premium receivables.  I am not sure if those are related or not.  I know that some premiums are paid up front and I believe would show up as the unearned premium liabilty.  There are also premiums which are paid in installments, which might be the premium receivables. 

 

At any rate, I think the premiums are just icing, for the investment to payoff it will depend on how much they can reduce the $6.5 B in loan losses by.  I think they need about $2.5B just to get to level, and then it starts accruing to tangible book.   

 

There is also the possibility for new business, at some point in the future.  That is where the NOLs would seem to really add value.

 

My basic thesis is that the premiums will continue to come in for years and together with interest will not only keep the lights on but generate some income.  We are not talking an insubstantial amount either relative to their size.  Last quarter there was $100M premiums earned + $85M interest earned, less $34M operating and $23M interest expense.  If they can reduce their losses and get to positive book, with the NOLs what would it be worth?

 

If you are interested in the idea, there are also warrants available with what appears to be a dilution adjustment.  The warrants strike at $16.67 in 2023 (or earlier if you like) and are under AMBCW.  Based on the option calculator I found on the internet they appear to be a touch on the cheap side given reasonable volatility adjustments.

 

Thank you very much! I guess I need to check their books and see how many are general obligations, what is their leverage ratio to have a sense of how risky it is. I hope valuecfa could add some input.

 

From their 10-Q:

http://google.brand.edgar-online.com/displayfilinginfo.aspx?FilingID=9298630-907-506841&type=sect&TabIndex=2&companyid=7342&ppu=%252fdefault.aspx%253fsym%253dAMBC

 

EPS per share was 0.93 last quarter, so in terms of PE, this is cheap. But book value is minus 2.8 bn? That is a concern. If they recover 66% of the 6.5 bn, then they could make the book value 1.2 bn, which is exactly today's market cap. In terms of price/book, this seems risky and not cheap.

 

Check out P. 57. You will see the Pro-Forma Fresh Start Consolidated Balance Sheet post-bankruptcy. The equity is actually $408M.

 

Thank you.

 

They don't seem to have booked any of the expected litigation recoveries onto their balance sheet, have they? So the 400 M book value is clean.

I am a bit concerned that their investment grade guarantees are only a small portion, so this could be quite risky.

[constructive]

Check out P. 57. You will see the Pro-Forma Fresh Start Consolidated Balance Sheet post-bankruptcy. The equity is actually $408M.

 

Yes, but subtract the goodwill, intangibles and noncontrolling interest.  Tangible equity attributable to shareholders is -$2.4B.

[JRH]

Ambac thread:

 

http://www.cornerofberkshireandfairfax.ca/forum/investment-ideas/ambc-ambac-assurance-corp/

[ERICOPOLY]

Has the CEO sold all of his MBI shares?

 

http://www.nasdaq.com/quotes/insiders/brown-joseph-w-385622

 

 

EDIT:  I'm sort of curious how this "non-open market" disposition thing works.  Does it show up like that if he moves his shares into a GRAT?  Like, if he's expecting a pop in the stock, he moves it to the GRAT so the appreciation occurs outside of his estate.  I see some symmetry in 749,000 shares disposition "non-open market direct" and then sold once again as an indirect owner.  A GRAT might be considered a related party and thus "indirect" ownership.

 

 

[valuecfa]

Has the CEO sold all of his MBI shares?

 

http://www.nasdaq.com/quotes/insiders/brown-joseph-w-385622

 

He sold all of the shares in his irrevocable trust. A big sale that was supposedly done for estate planning purposes.

 

This amount represented more than half of all his total holdings in all vehicles. He still has 703,456 shares left in his 401k plan, and in the form of restricted shares.

 

A big sale no doubt. He no longer claims beneficial interest in the securities, so the shares may have been "sold' to his heirs, or simply sold out for cash at 14.501. You can't tell from public sources any level of detail greater than that. I'm sure he will comment on it on the next conference call. Most likely the shares were simply sold to take the tax loss in the irv trust

[Guest Dazel]

 

 

The board handcuffed him negotiated a deal without him...after he fought for years for the shareholders including himself...All of that work for nothing...he could have done the same deal two years ago likely...it was not that good a deal for mbia. I suspect he will sell all of his shares and quit. I would.

 

Dazel.

 

 

[Guest Dazel]

 

 

If were Bank of America I would hire him...the strength of his resolve was quite something.

 

 

Dazel.

[yitech]

Check out P. 57. You will see the Pro-Forma Fresh Start Consolidated Balance Sheet post-bankruptcy. The equity is actually $408M.

 

Yes, but subtract the goodwill, intangibles and noncontrolling interest.  Tangible equity attributable to shareholders is -$2.4B.

 

Good point. On p.58, it mentioned the definition of insurance intangible($2.345B), which appeared out of thin air post-bankruptcy.

"Insurance intangible: Represents the fair value adjustment for financial guarantee insurance and reinsurance contracts."

 

It seems like some sort of fair-value adjustment. Do you think it ought to be assigned zero value? Does anyone know what the heck it really is? (I will post this one on the new AMBC thread as well.)

[muscleman]

Check out P. 57. You will see the Pro-Forma Fresh Start Consolidated Balance Sheet post-bankruptcy. The equity is actually $408M.

 

Yes, but subtract the goodwill, intangibles and noncontrolling interest.  Tangible equity attributable to shareholders is -$2.4B.

 

Good point. On p.58, it mentioned the definition of insurance intangible($2.345B), which appeared out of thin air post-bankruptcy.

"Insurance intangible: Represents the fair value adjustment for financial guarantee insurance and reinsurance contracts."

 

It seems like some sort of fair-value adjustment. Do you think it ought to be assigned zero value? Does anyone know what the heck it really is? (I will post this one on the new AMBC thread as well.)

 

It reads like the difference between actual book value and Adjusted book value that MBI and AGO reports.

This probably means the current 400 M equity is the adjusted book value. This is not very attractive at all, not to say the policies they carry are not as safe as MBIA.

[stahleyp]

value, now that it's under $14, have you been adding?

[Liberty]

http://online.wsj.com/article/SB10001424127887323495604578539550282302628.html?mod=googlenews_wsj

 

J

udge Sweet ruled that Patriarch Partners didn't breach that contract with MBIA. The bond insurer had been seeking more than $100 million in damages, said Hillary Richard, a lawyer for Patriarch Partners.

 

The judge found that "it was unfair to blame Patriarch for market forces for which Patriarch had no control," Ms. Richard said.

 

"We are disappointed by the decision and are considering our options," a spokesman for MBIA said in a statement.

[BargainValueHunter]

http://www.valuewalk.com/2013/06/fairholme-capital-sells-mbia-profit/

 

Bruce Berkowitz cashed in his profits from MBIA Inc. (NYSE:MBI), a new amended 13G filing shows. His firm, Fairholme Capital Management reduced holdings in the the insurer to 1.2 percent , or 2,250,100 shares of the company, a massive cut from previous ownership in 31,425,820 shares which made up a 16.3 percent stake.

 

Berkowitz’s Fairholme Capital was the second largest shareholder of MBIA after Warburg Pincus LLC which owns 474 million shares.