Bond Insurers

[HenryTo]

This continues to bear watching going forward:

http://www.bloomberg.com/apps/news?pid=20601109&sid=aOjl_Hy9ibBI&refer=exclusive

[HenryTo]

Tom Brown at bankstocks.com slams Egan Jones' recent "analysis" of the bond insurers, and what it will take for them to retain their triple-A ratings. A must-read:

http://www.bankstocks.com/article.asp?type=1&id=9881638

[rffrydr]

Maybe no bailout is the bullish news. Muni insurance was an artefact of the OC bankruptcy in 94. And bank's resistence may be a sign they think they already have a good markdown.

http://biz.yahoo.com/bizwk/080207/0807b4071020418218.html?.v=1
_________________
Today is the Tomorrow you worried about Yesterday!

[rffrydr]

Imteresting stock issue for MBIA has price up 8% AH. Warburg offers the difference on 750 million stock offering. Dilution is no longer the question?

http://www.reuters.com/article/marketsNews/idUKN0631653620080207?rpc=44
_________________
Today is the Tomorrow you worried about Yesterday!

[HenryTo]

Wilbur Ross announces that he will make a decision on whether to invest in any of the credit insurers sometime within the next few weeks:

http://www.cnbc.com/id/23008258/site/14081545?__source=yahoo%7Cheadline%7Cquote%7Ctext%7C&par=yahoo

[HenryTo]

Here is Morgan Stanley's take on the monolines:
------------------------------------------------------------------------------------
Bank losses from monolines likely $5-7 bln: analyst

NEW YORK (Reuters) - Financial institutions are likely to take only around $5 billion to $7 billion in losses from their exposure to bond insurers, while a bailout of the industry by banks is unlikely, Morgan Stanley said on Monday.

Monoline bond insurers are under review to lose the "AAA" ratings vital to their business, as their capital is not viewed by rating agencies as adequate due to losses they are expected to take from insuring risky residential mortgages.

Some analysts have said they believe U.S. financial institutions exposed to the bond insurers are facing as much as $50 billion to $70 billion in losses, though Greg Peters, Morgan Stanley's lead credit analyst, said he views exposures as significantly lower.

"That (number) seems too high to us to begin with and that is a gross number," he said on Monday on a conference call.

Morgan Stanley evaluated mortgage exposure in Collateralized Debt Obligations (CDOs) insured by the bond insurance arms of Ambac Financial Group Inc (ABK.N: Quote, Profile, Research), FGIC, Security Capital Assurance (SCA.N: Quote, Profile, Research), and MBIA Inc (MBI.N: Quote, Profile, Research), and determined that exposures by U.S. banks is likely in the $20 billion to $25 billion range.

Once the capacity of the bond insurers to pay out claims is taken into account, and assuming that a bankruptcy doesn't force the insurance arms of the companies out of business, likely losses are in the $5 billion to $7 billion range, Peters said.

Bond insurers typically have holding companies, which issue stock and debt, while the insurance arm generates the income that pays dividends on the stock.

"These are very complex structures...very little in the way of investors really understand the dynamics of these structures," Peters said.

While the inability of an insurer to generate new business could weigh on the holding company, and potentially drive the stock price down to zero, the insurance arms could continue to operate on its existing business, and continue to pay claims, he said.

In this scenario, the counterparty exposure of banks to the insurers is negligible, he added.

DOWNGRADES, NEW ENTRANTS

Meanwhile Morgan Stanley continues to view a downgrade of MBIA or Ambac as likely, in spite of talks between banks and the New York insurance regulator for a bailout of the industry.

"We believe there will be downgrades, absolutely," Peters said. "A LTCM style kind of bailout is pretty remote."

Hedge fund Long Term Capital Management (LTCM) was bailed out by a consortium of banks in 1998 after it faced margin calls on heavily levered exposures to U.S. government bonds and emerging market debt.

"We just don't think the incentives exist, banks are clearly capital constrained, the exposure to the monolines is far from uniform, so one dealer might not want to help out their competitor when they have a very limited exposure," Peters said.

"I think the key difference is, unlike LTCM, these losses are not temporary," he said. "They're real losses, the ABS CDO losses are real and will actually be taken at some point in time, unlike the temporary kind of liquidity phenomenon of 1998...you're actually asking banks and dealers to pony up cash to help plug a loss that's far from temporary."

Meanwhile, Financial Security Assurance (FSA), Assured Guaranty Corp (AGO), whose "AAA" ratings are not under review, and the new market entrant created by Warren Buffett's Berkshire Hathaway Inc (BRKa.N: Quote, Profile, Research) (BRKb.N: Quote, Profile, Research), will likely be sufficient to satisfy market needs for bond insurance, Peters added.

"You don't need to have an Ambac still in business, you've got the FSA, AGO and Berkshire Hathaway...they can come in and write new business," Peters said. "So we're not convinced that you need to have existing monolines still up and running as you have other ways that you could actually wrap that risk."

[rffrydr]

"Recoupling" has many paths:

http://www.forbes.com/markets/feeds/afx/2008/02/04/afx4609218.html
_________________
Today is the Tomorrow you worried about Yesterday!

[rffrydr]

Done and done:

http://www.reuters.com/article/gc03/idUSN0117320820080201
_________________
Today is the Tomorrow you worried about Yesterday!

[HenryTo]

As Winston Churchill would say: "Americans will always do the right thing, after they have exhausted all the alternatives." (note I am not going to discuss politics here).

Of course, there are others out there who don't like this government-induced intervention, citing moral hazard issues, fairness issues, etc. The alternative, though, is much worse, and will impact all our lives in a (net) negative way, unless one is short MBIA, Ambac, or the financials, of course.

[rffrydr]

This is the course we all, the market, assumed two months ago. Not too big to fail; too necessary to fail. Yet we're pushed to the brink.

This can spin many interpretations. On the crazier side, the banks may actually think their written-off books are worth something. Insurers then came as an afterthought.
_________________
Today is the Tomorrow you worried about Yesterday!

[HenryTo]

Here it is. Note that the deal isn't finalized yet. However, now that it has been announced, I doubt it will fall apart.
-----------------------------------------------------------------------------------
Eight banks seek rescue plan for bond insurers

NEW YORK, Feb 1 (Reuters) - Eight banks have formed a consortium to seek a rescue plan for MBIA Inc (MBI.N: Quote, Profile, Research), Ambac Financial Group Inc (ABK.N: Quote, Profile, Research) and other troubled bond insurers, CNBC said on Friday, citing an unnamed source.

The eight banks include Barclays Plc (BARC.L: Quote, Profile, Research), BNP Paribas (BNPP.PA: Quote, Profile, Research), Citigroup Inc (C.N: Quote, Profile, Research), Dresdner (ALVG.DE: Quote, Profile, Research), Royal Bank of Scotland Group Plc (RBS.L: Quote, Profile, Research), Societe Generale (SOGN.PA: Quote, Profile, Research), UBS AG (UBSN.VX: Quote, Profile, Research) and Wachovia Corp (WB.N: Quote, Profile, Research), CNBC said.

Wachovia had no immediate comment. Citigroup, Ambac and MBIA did not immediately return requests for comment. The other banks were not immediately available for comment.

Shares of MBIA rose $2.50, or 16.1 percent, to $18 in trading before the market opened. Ambac rose $2, or 17.2 percent, to $13.64.

Regulators, including New York Insurance Commissioner Eric Dinallo, have been meeting with industry participants to discuss a rescue for bond insurers, which guarantee some $2.5 trillion of debt. State and local governments issue much of this debt.

Many of those insurers have encountered trouble from their decision in recent years to begin guaranteeing complex securities, often backed by mortgages, to increase profit.

Those decisions backfired last year as credit markets tightened, homeowner defaults soared, and the value of those securities, including collateralized debt obligations, sank.

On Thursday, MBIA reported a record $2.3 billion quarterly loss and said it was looking for ways to raise new capital.

Credit rating agencies have taken away their critical "triple-A" ratings from a handful of bond insurers and have threatened to do the same for MBIA and Ambac, the industry's largest insurers. Losing "triple-A" ratings would make it difficult for bond insurers to attract new business. (Reporting by Christian Plumb and Jonathan Stempel; Editing by Lisa Von Ahn and Steve Orlofsky)

[rffrydr]

MBIA's book value per share at December 31, 2007 decreased to $29.11 from $53.43 at December 31, 2006, which includes a $19.24 impact from the third and fourth quarters' mark-to-market from the Company's structured credit derivatives portfolio. Adjusted book value (ABV) per share at December 31, 2007 declined 20 percent to $60.31 from $75.72 at December 31, 2006. ABV is a non-GAAP measure (which is defined in the attached Explanation of Non-GAAP Financial Measures).
_________________
Today is the Tomorrow you worried about Yesterday!

[rffrydr]

I have to say these guys are getting short shrift in the press: CNBC nothing short of mudslinging. A surprise from channel permabull.



http://money.cnn.com/2008/01/31/news/companies/boyd_mbia.fortune/?postversion=2008013115
_________________
Today is the Tomorrow you worried about Yesterday!

[rffrydr]

No worries here:

http://library.corporate-ir.net/library/88/880/88095/items/277575/Earning20call20Q4-FINAL13108.pdf

That's the worry.
_________________
Today is the Tomorrow you worried about Yesterday!

[rffrydr]

MBI conference call:

http://investor.mbia.com/phoenix.zhtml?c=88095&p=irol-irhome

Hadrian's Wall as their corporate symbol--funny.
_________________
Today is the Tomorrow you worried about Yesterday!

[rffrydr]

Real Property vs. Markets. Saying it simply: