MBIA Inc. - Buying Is A No-Brainer
MBIA's Valuation And Puerto Rico Risks - Clarity Is Coming
Jeff Boyd • 13 Comments
Jeff Boyd • 13 Comments
Thu, Sep. 29, 7:26 AM
- The sale of MBIA UK to Assured (NYSE:AGO) is part of MBIA's (NYSE:MBI) plan to address the maturity of the Zohar II Notes on Jan. 20, 2017, which had about $772M of gross par outstanding as of the end of Q2.
- MBIA does not currently expect that the Zohar II CLO will have sufficient cash flow to repay all of the Zohar II notes at maturity. The deal is hoped to close in early January, but there's no assurance it will or that MBIA's strategies will be successful.
Mon, Aug. 8, 4:26 PM
Sun, Aug. 7, 5:35 PM
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Wed, Jun. 29, 12:47 PM
- Cloture was invoked by a wider-than-expected 68-32 margin, putting the Puerto Rico debt relief bill on track to pass before the end of the week, when the Commonwealth's government says it will default on its most senior debt payments.
- The White House is a big backer of the bill, and the President is expected to sign quickly once the full Senate passes. The law doesn't authorize or prevent a default, but will provide Puerto Rico with protection from creditor litigation (i.e. hedge funds "suing the Commonwealth to death") while it works out a restructuring.
- It's good news for the bond insurers MBIA (MBI +2.9%), Assured Guaranty (AGO +3.9%), and Ambac (AMBC +5.3%), says BTIG's Mark Palmer, as it avoids what could have been a chaotic debt restructuring.
Wed, Jun. 22, 11:22 AM
- While shares of MBIA (NYSE:MBI) and Assured Guaranty (NYSE:AGO) were hit this week thanks to a breakdown in talks between Puerto Rico and its creditors. The breakdown shouldn't be surprising, writes Mark Palmer at BTIG, but is instead part of the normal back and forth between negotiating parties.
- More notable, says Palmer, is the Commonwealth's latest proposal to certain bondholders which he believes gives investors an idea of what a worst-case scenario will look like.
- Palmer's previous estimate of MBI's loss per share on its Puerto Rico exposure of $5.14 is cut to $4.26. For AGO, it was $6.09, but has been cut to $5.19.
- He reiterates his Buy ratings on both, and lifts the PT on MBI to $14 from $13 (100% upside). The PT on AGO remains at $35 (40% upside).
- MBI +3.25%, AGO +0.55%
Mon, Jun. 13, 10:36 AM
- The law would have allowed the Commonwealth to restructure the debt of its utility companies to help deal with the financial crisis there. Siding with bondholders, the Supreme Court by a 5-2 margin ruled the law unconstitutional.
- The ruling puts the ball in Congress' court to fashion a bailout.
- MBIA (MBI +0.8%) has nosed higher on the news. Assured Guaranty (NYSE:AGO) is flat.
Thu, Jun. 2, 3:54 PM
- An audit report suggests Puerto Rico be may able to void some its borrowing because it may have issued illegally - that is lawmakers exceeded Constitutional debt limits.
- Source: Marketwatch
- At issue is a 2014 $3.5B general obligation bond offering, and $900M of 2015 Tax Refund Anticipation Notes.
- Money to make debt payments on these is not in the government's proposed budget. Governor Padilla: "Either we pay Wall Street or we pay Puerto Ricans."
- Going back to the report, it says the government cannot borrow to finance operating deficits, but the 2014 GO offering was just that.
- Watching with interest: MBIA (MBI -1.7%), Assured Guaranty (AGO +0.6%)
Wed, May 25, 3:45 PM
- While the Puerto Rico Oversight, Management and Economic Stability Act (Promesa) made it out of committee today, don't look for anything to pass in June, says KBW.
- The team expects both parties in the Senate to have revisions and to propose amendments.
- This could be an issue as Puerto Rico has a debt payment of about $2B coming due July 1 - far more than payments it has already defaulted on.
- KBW still thinks we'll get a bill, just not before July 1.
- Interested parties: MBI, AGO, AMBC
Tue, May 10, 10:30 AM
- While the low rate environment remains a headwind to new municipal bond insurance business, and $3.86B of exposure to Puerto Rican debt is an overhang, MBIA (MBI +0.8%) nevertheless added shareholder value in Q1, writes BTIG's Mark Palmer.
- Adjusted book value was boosted by nearly 7% Q/Q to $31.74 thanks to a fast pace of buybacks, and the stock now trades for less than 25% of ABV.
- In a worst-case scenario for Puerto Rico, according to Palmer's calculations, MBIA could lose $7.42 per share of ABV to $24.32. Even a 0.5x multiple on that results in a stock price of $12.16, or more than 60% above the current level.
- Palmer retains his Buy rating and $13 price target.
- Previously: Buybacks fuel book value gain at MBIA (May 9)
Mon, May 9, 4:39 PM
- Adjusted book value per share of $31.74 up from $29.69 three months earlier, mostly thanks to 15M of buybacks at an average price of $6.30 each..
- U.S. Public Finance operating income of $37M vs. $56M a year ago. Total net premiums earned of $58M down from $85M. $158M of gross par amount of new insurance written vs. $38M. Net investment income of $31M up 7%.
- Conference call tomorrow at 8 ET
- Previously: MBIA misses by $0.01, misses on premius earned (May 9)
- MBI -1.3% in thin after hours action
Mon, May 9, 4:28 PM
Sun, May 8, 5:35 PM
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Tue, Apr. 26, 11:21 AM
- Its deja vu all over again for MBIA (MBI +1.9%), which yesterday took a hit for the nth time since 2013 over concern with its exposure to the Zohar II CLO.
- BTIG's Mark Palmer again points out that no matter what happens to Zohar, or to MBIA Insurance - the unit in which the CLOs are housed - "it will have no impact whatsoever" on the value of MBIA's common stock.
- In calculating his $13 PT for MBIA, Palmer has already ascribed zero value for MBIA Insurance. The market may be factoring in negative value, but even in a situation where regulators seize the unit, there would be no cross default with any holding company debt.
- Previously: MBIA off sharply; KBW sees material risks (April 25)
Mon, Apr. 25, 3:23 PM
- Calling a potential restructuring of Puerto Rico's debt and a potential default of the company's Zohar II exposure in January 2017 material risks, KBW's Chas Tyson starts MBIA (MBI -7.5%) with a Market Perform rating.
- Zohar I is a CLO which made loans to companies owned by Lynn Tilton's Patriarch Partners. Zohar I filed for bankruptcy late last year after Tilton and MBIA couldn't come to terms. Zohars II and III were not part of that filing.
Mon, Apr. 4, 3:39 PM
- A group of hedge funds sued Puerto Rico's Government Development Bank aiming to halt the GDB from making transfer payments to selected creditors until after the bank's debt has been restructured.
- MBIA (MBI -5.9%), Assured Guaranty (AGO -2.7%), and Ambac (AMBC -3.9%) are all lower, but the suit isn't a negative for the insurers, says BTIG's Mark Palmer, noting media reports are describing it as applying to all of Puerto Rico's debt.
- He notes one reporter's tweet: “A group of hedge funds sues to keep Puerto Rico from making payments to creditors prior to restructuring its debt."
Thu, Mar. 31, 11:16 AM
- A group of 170 House Republicans yesterday called the latest rescue plan "bankruptcy-style involuntary restructuring," a win for creditors hoping to avoid a court-supervised process which could force them to take haircuts, writes Amey Stone.
- On the other side of the aisle, a number of Democrats aren't pleased with a draft giving to much power to a financial control board operating independently of Puerto Rico's elected officials.
- "We think the RSC’s [House Republican Study Committee] opposition to the discussion draft bill is good news for creditors and financial guarantors," says KBW. "We continue to note that the situation surrounding the discussion draft remains fluid and we expect changes to the draft will be made in the next 2-3 weeks."
- MBIA (MBI +0.5%), Assured Guaranty (AGO +0.2%)
- Now read: My Top Insurance Stocks For 2016 (March 12)