MBIA Dismisses Ackman: Got A Better Plan?

MBIA (MBI) immediately dismissed Bill Ackman's plan for them yesterday after barely a cursory view. MBI stated:

Like Mr. Ackman's open-source model, his statements in the media and the barrage of letters he has sent to regulators and the rating agencies -- which contain half truths, innuendo and faulty analysis -- this proposal is simply a continuation of Mr. Ackman's campaign to profit from his short positions and credit default swaps in the bond insurance industry...

...Our preference, like the regulators, continues to be finding a solution that would be in the best interest of all policyholders...

Here is where the hypocrisy comes in. In the Wall St. Journal, MBIA indicated it agrees with a spokesman for the New York insurance department who said Mr. Ackman's proposal would split the company, and likely lead to a substantial downgrade for the structured side.

Splitting bond insurers into two sectors -- one focused on lower-risk municipal bonds and another to handle higher-risk collateralized debt obligations -- allows shareholders of the lower-risk holding company to benefit while holders of the CDOs suffer.

Thus the dismissal of Ackman's plan. It should be noted this was probably done before it was read, but that is another issue.

Here is the rub. Later in the same article it is noted that MBIA Chief Executive Joseph W. Brown Jr, upon returning to the the CEO post, vowed to work with regulators to restore confidence in the company. He also said he would consider splitting the company.

Now, on one hand we have the company coming out and dismissing Ackman because his proposal would spit the company, then we have the CEO coming out and saying he would consider that very split idea.

The bottom line is they have no plan. What they are waiting for is a State or Federal bailout. They have been "talking" to insurance regulators for months now and nothing has been forthcoming from them. There has been no plan, only stonewalling.

They have dismissed plans from Berkshire Hathaway's (BRK.A) Warren Buffett and now Bill Ackman. Wilbur Ross has stated he was interested in investing in them but talks with management have gone nowhere.

Here is the thing. Ackman, Buffett and Ross are all self made billionaires (maybe not yet for Ackman) and all are obviously smarter than those in charge of the now failing bond insurers. The fact that they cannot get anywhere with management ought to be a sign... a bad one...

Disclosure: No position.

Comments

[mark in arl...:]

mr. sullivan, you are either a all knowing genius or just a know it all. Get the facts CORRECT!!!!!!.me or you or anybody outside of parties involved really knows what is going on. to give the ridiculous proposals submitted by a greedy billionare, and a con artist hack job who imploded his last fund through stupidity are just assanine rhetoric.yuo dont seem to under stand what a delicate matter this is , the world financial markets could be thrown into chaos by an inept quick fix,say hi to ackman and his buddies cramer and gasbag.ps you are a fool.

2008 Feb 25 08:06 AM

[ct_programmer:]

How is raising billions in capital to shore up their reserves not a plan? And why on earth would ANYONE listen to Ackman? You talk about him like he's some genius. He's short MBIA and Ambac and disseminating all the bad press he can to lower their stock values and make a buck. And how is suggesting that the two split --- which many people have done --- "Ackman's plan"? And "Buffet's plan" was "you give us the good stuff and keep the bad". How is that a "plan"? The only real plan is that banks have a lot riding on these monolines and if they can cooperate on a deal (like it appears they are doing with Ambac and likely already with MBIA on the quiet), then they won't have to write down as much. Will MBIA, Ambac or some of the others survive? Some likely will and some won't, either with or without some sort of government assistance. Some of these companies will go under and some in 5 years will look back with at it as just some storm they had to weather. Should the 3 little pigs have considered the Wolf's "plan"?

2008 Feb 25 08:14 AM

[bondboy:]

Let's review. Mr. Ackman is heavily short both Ambac and MBIA. Mr. Ackman suggests that those companies' insurance subsidiaries be prohibited from sending dividends to their parents, thus benefitting policy holders (and Mr. Ackman). Mr. Ackman is hyper critical of fresh infusions of equity into these companies (throwing good money after bad), notwithstanding that such infusions would mightily benefit policy holders (and harm Mr. Ackman). I understand Mr. Ackman's position of self interest on these matters. Your position, sir, is baffling (unless you are also a fellow short).

2008 Feb 25 08:37 AM

[john haskell:]

When MBIA and Ambac are resting securely on the bottom of the ocean, posters 1-3 above will look foolish.

In the meanwhile, it would be nice (as Ackman proposed) for what little cash flow dribbles out of these companies to be paid first to muni policy holders, and subsequently to structured finance gamblers.

There is a much stronger public policy argument for supporting the muni market (which will live on) instead of supporting the structured finance market, which has about the same life expectancy as a GI who just sat down on a live grenade.

2008 Feb 26 02:44 PM