Tuesday, February 19, 2008 5 comments ++[ CLICK TO COMMENT ]++

MBIA: CEO Shuffle; Ambac: Trying to Raise $2 Billion

UPDATE: Added to link to Tom Brown's rebuttal of the bears...

MBIA Replaces CEO

I never really understand the goings and comings of MBIA. The latest event is the CEO shuffle:

Bond insurer MBIA Inc said Tuesday that former Chairman and CEO Joseph Brown was returning to replace current CEO Gary Dunton as the company, beset by mortgage-related losses, scrambles to maintain a top credit rating...

Between 1999 and 2004, Brown ran MBIA and its main unit, MBIA Insurance Corp. He joined the firm as a director in 1986 and retired last May.

Well, it's hard to say what is positive news and what is negative these days. I am guessing that this is good news given that the CEO ran the company before and was with the company as recently as early last year. I am guessing that Warburg Pincus and other key shareholders likely pushed for the change (there was little else that happened to warrant a shuffle).

Ambac Trying to Raise Capital

Ambac is trying to raise around $2 billion via a rights offering. It's premature to say anything concrete until we get the details on the cost and the amount. A lot depends on how much capital is required by the rating agencies. No word on what the agencies are requesting.

It also looks like both Ambac and MBIA are trying to split their muni bond business from the structured product business. I personally am not favourable to this idea. It involves too many complexities, increases legal liabilities, and can result in shareholders being pushed aside. I think the government needs to provide cover and absorb any lawsuits for any of this to make sense.

Tom Brown has a good write-up of the situation. He is bullish so we both share the same wavelength on many thoughts...

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5 Response to MBIA: CEO Shuffle; Ambac: Trying to Raise $2 Billion

February 20, 2008 at 10:20 AM


February 20, 2008 at 10:58 AM

It's amazing how much air time Ackman gets. I can't think of a short seller who has ever been considered as an "expert" providing solutions to an industry. Usually short-sellers are shown the door by the media but not in this case.

Well, needless to say, things are getting closer to the end game. Either Ackman is really confident with his bet, or he is running scared now. His proposal--which is nothing new--is to bankrupt the holding companies. It's surprising to see some people call Ackman's latest proposal as something radically different and new from his earlier proposals. If the companies split and are provided legal cover by the state, Ackman will likely lose his bet.

February 20, 2008 at 11:27 AM

When you talk about legal cover, do you mean free from liability on the SF side? Sounds like this could be a major contract law case..?

February 20, 2008 at 11:54 AM

Yep... I'm talking about the possibility of structured product insurance buyers suing the monolines. That is a HUGE liability.

Without knowing anything about legal matters, I suspect one solution may be to split the company while leaving most of teh claims-paying ability with the structured product side. This may satisfy the SF insurance buyers since they don't really lose much...

February 20, 2008 at 12:59 PM

At least the state regulator is shooting down Ackman's idea before it gains much traction outside the media...

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