tag:blogger.com,1999:blog-6798074091942701235.post7850564017073177899..comments2024-03-29T01:35:09.550-04:00Comments on Can Turtles Fly?: Economy and Asset Prices May DivergeSivaram Vhttp://www.blogger.com/profile/06361276466660862882noreply@blogger.comBlogger8125tag:blogger.com,1999:blog-6798074091942701235.post-59409814863923558912008-02-07T20:02:00.000-05:002008-02-07T20:02:00.000-05:00By KAREN RICHARDSONFebruary 7, 2008 7:52 p.m.Bond-...By KAREN RICHARDSON<BR/>February 7, 2008 7:52 p.m.<BR/><BR/>Bond-insurer MBIA Inc. said it boosted the size of a share offering to $1 billion from $750 million after it was oversubscribed by investors.<BR/><BR/>The Armonk, N.Y.-based company said it priced 82,304,527 shares of common stock at $12.15 a share to raise $1 billion. The offering is larger than its previously announced $750 million share issue and is likely to be greeted positively by analysts and investors who have been worried that the company will lose its coveted AAA credit rating.<BR/><BR/>Together with a previously announced $500 million share-purchase by private-equity fund Warburg Pincus LLC and a $1 billion debt issue in January, the share offering brings the total amount of capital raised by MBIA to $2.5 billion.<BR/><BR/>It will likely use the proceeds to buttress its capital levels and preserve its rating, which has been placed on watch for possible downgrade by Fitch Ratings, Moody's Investors Service and Standard & Poor's.<BR/><BR/>"The company intends to contribute most of the net proceeds of the offering to the surplus of its subsidiary, MBIA Insurance Corporation," MBIA said in a news release<BR/><BR/>In another vote of confidence, Warburg Pincus will also buy $300 million in common stock as part of the offering, according to the MBIA news release. MBIA said it doesn't intend to tap a "backstop" by Warburg to buy $300 million in convertible participating preferred stock. A backstop is an agreement to buy a certain amount of shares if an offering isn't fully subscribed.<BR/><BR/>Two Warburg managing directors, David Coulter and Kewsong Lee, have joined the MBIA board of directors.<BR/><BR/>MBIA said it has granted the underwriters J.P. Morgan Chase & Co. and Lehman Brothers Inc. a 30-day option to buy up to an additional 12,345,679 shares of common stock to meet orders for more shares than currently exist in the offering.<BR/><BR/>MBIA and its rivals, including Ambac Financial Group Inc., insure about $2.4 trillion in debt, guaranteeing the principal and interest in the event of default. Most of it is municipal debt, but bond insurers have about $100 billion exposure to complex debt securities backed by mortgages, which have been deteriorating and increasing the likelihood that the bond insurers will need to pay out substantial claims.cakhttps://www.blogger.com/profile/08156778168786135341noreply@blogger.comtag:blogger.com,1999:blog-6798074091942701235.post-20044861572126620162008-02-07T19:59:00.000-05:002008-02-07T19:59:00.000-05:00I have to correct. The early news was not very cle...I have to correct. The early news was not very clear. Originally Pincus was buying a conv pfd but it looks like that has changed.<BR/><BR/>Brief WSJ note -<BR/><BR/><A HREF="http://online.wsj.com/article/SB120242947656352123.html?mod=googlenews_wsj" REL="nofollow">MBI</A>cakhttps://www.blogger.com/profile/08156778168786135341noreply@blogger.comtag:blogger.com,1999:blog-6798074091942701235.post-47402660019153291922008-02-07T19:46:00.000-05:002008-02-07T19:46:00.000-05:00It's interesting how this is all playing out. As y...It's interesting how this is all playing out. As you said, MBIA is going all in. It is literally betting everything to keep its rating. It may have had no other choice because it already diluted shareholders so raising another billion is simply continuation of that strategy. <BR/><BR/>Ambac, on the other hand, is in a really tough situation and I am not sure what they will do.<BR/><BR/>I personally think this was a huge positive for MBIA. It diluted shareholders heavily but it gives a huge signal to the market that some parties are willing to invest at these price levels. Although MBIA is a rival to Ambac and this doesnèt really mean anything good is happening to Ambac, I think positive news from a fellow monoline is good...Sivaram Vhttps://www.blogger.com/profile/06361276466660862882noreply@blogger.comtag:blogger.com,1999:blog-6798074091942701235.post-30745696181529362072008-02-07T19:05:00.000-05:002008-02-07T19:05:00.000-05:00MBI sold an additional 80 million shares to raise ...MBI sold an additional 80 million shares to raise another 1 billion, on top of the 750 mill pfd. Shares were sold at 12.15. Don;t know who the buyers are yet.<BR/><BR/>The ratings agencies put a gun to MBI's head threatening the AAA, and for better or worse - essentially diluting the shares all to hell - the co. has decided to go all in to maintain it. And still no guarantee!<BR/><BR/>I wonder if Whitman bought some more? But he loathes these dilution scenarios. I wonder what his input was in all this?cakhttps://www.blogger.com/profile/08156778168786135341noreply@blogger.comtag:blogger.com,1999:blog-6798074091942701235.post-78617729850259194032008-02-06T21:19:00.000-05:002008-02-06T21:19:00.000-05:00As for the ratings agencies, I thought it was humo...As for the ratings agencies, I thought it was humorous that S+P put China Aluminum on negative credit watch after the company bought a 14 billion dollar stake in miner Rio Tinto. It was as if they did'nt get the memo that Beijing has allocated Chalco 120 billion, just in case they wanted to buy the whole enchilada. Amazing.cakhttps://www.blogger.com/profile/08156778168786135341noreply@blogger.comtag:blogger.com,1999:blog-6798074091942701235.post-28146205747269335592008-02-06T21:01:00.000-05:002008-02-06T21:01:00.000-05:00It's definitely been a tough market, although the ...It's definitely been a tough market, although the Fed cut inducing rally helped out a bit - so its a lot of zig-zagging going nowhere.<BR/><BR/>Check this out -<BR/><BR/><A HREF="http://kanjorski.house.gov/index.php?option=content&task=view&id=1033" REL="nofollow">Feb14</A>cakhttps://www.blogger.com/profile/08156778168786135341noreply@blogger.comtag:blogger.com,1999:blog-6798074091942701235.post-65326548487376707492008-02-06T20:09:00.000-05:002008-02-06T20:09:00.000-05:00Hi Cak,Hope things are well. We are having a snow ...Hi Cak,<BR/><BR/>Hope things are well. We are having a snow storm in Toronto so it's all white everywhere :) <BR/><BR/>How is the rest of your portfolio holding up? With the way the markets are selling off, it'll be interesting to see which one results in a greater loss.<BR/><BR/>As for the monolines, well, there is the good, the bad, and the ugly.<BR/><BR/>The ugly news of late is the fact that some rating agencies, like Fitch, expect to see materially higher losses in subprime assets. It's difficult to say what any of this means given that everything depends on the specifics of the insured asset. Fitch also basically implied that almost no amount of capital is enough to keep an AAA rating with subprime exposure. For what it's worth, the rating agencies have even less credibility than the monolines right now.<BR/><BR/>The bad news is that the US economy is slowing materially, and may go into a recession. The subprime problems materialized before an actual economic slowdown so it remains to be seen what happens with a real slowdown. Economic slowdown may adversely impact non-mortgage assets like insured credit card debt, insured auto loans, and the like.<BR/><BR/>The good news is that the stock prices have been flat, moving up and down within 10% range, for a while now. This doesn't mean that they won't collapse any minute now, but it does mean that the market is waiting to see what unfolds with the ratings, capital funding, and other issues.<BR/><BR/>I get the feeling that the panic over the monolines is kind of dying down. It'll come down to what the monolines can actually do and what the economic losses turn out to be...Sivaram Vhttps://www.blogger.com/profile/06361276466660862882noreply@blogger.comtag:blogger.com,1999:blog-6798074091942701235.post-10872003184331579022008-02-06T16:34:00.000-05:002008-02-06T16:34:00.000-05:00Slippery slope. MBInewstockSlippery slope. <BR/><BR/><A HREF="http://investor.mbia.com/phoenix.zhtml?c=88095&p=irol-newsArticle&ID=1105242&highlight=" REL="nofollow">MBInewstock</A>cakhttps://www.blogger.com/profile/08156778168786135341noreply@blogger.com