- While MBIA (MBI +0.3%) management sees progress on several fronts for restructuring Puerto Rico's debt--namely COFINA and PREPA bonds--there's still a long way to go, writes BTIG analyst Mark Palmer.
- Palmer rates the stock a buy and has a $14 price target.
- While the recent COFINA debt restructuring pact reached earlier this month is an important step, several elements of the pact still need to be worked out, management told Palmer.
- A court ruling that allows a receiver to be appointed to manage power utility PREPA may allow the utility to increase electricity rates, but applying better management and improving efficiency may have a bigger effect, MBIA management says.
- “If we had (COFINA and PREPA) restructured and approved by the court in the next year that would be a lot of progress in a relatively short period of time,” CEO Bill Fallon said.
- Meanwhile, Puerto Rico's improving economy should also help as it continues negotiations on its exposure to the island's debt.
- Once COFINA and PREPA's debt restructurings are resolved, MBIA would be well positioned to request a special dividend from National Public Finance Guarantee, its municipal bond insurance subsidiary, to its holding company.
- A special dividend would provide "significant liquidity" to the holding company, Fallon said.
- Previously: Bond insurers Ambac, Assured Guaranty, MBI gain on Cofina deal (Aug. 9)