BAILOUT? - New York Insurance Superintendent watching bond insurers, may intervene

"SAN FRANCISCO (MarketWatch) -- Ambac Financial surged 72% and MBIA Incjumped 33% on Wednesday afternoon after the Financial Times reported that New York insurance regulators have asked the bond insurers' major counterparties to pump $15 billion of fresh capital into the struggling industry. Eric Dinallo, New York insurance superintendent, has met executives at the banks and has strongly urged them to provide $5 billion in immediate capital to support the bond insurers and to ultimately commit up to $15 billion, the newspaper said, citing unidentified people familiar with the situation."


this is getting a little circular. If banks add 15 billion to bond insurers they are essentially guarranteeing their own bonds. :confused:
 
Quote from Cdntrader:

"SAN FRANCISCO (MarketWatch) -- Ambac Financial surged 72% and MBIA Incjumped 33% on Wednesday afternoon after the Financial Times reported that New York insurance regulators have asked the bond insurers' major counterparties to pump $15 billion of fresh capital into the struggling industry. Eric Dinallo, New York insurance superintendent, has met executives at the banks and has strongly urged them to provide $5 billion in immediate capital to support the bond insurers and to ultimately commit up to $15 billion, the newspaper said, citing unidentified people familiar with the situation."


this is getting a little circular. If banks add 15 billion to bond insurers they are essentially guarranteeing their own bonds. :confused:
More...

man, if thats all that dinallo proposed this is some very bad news for these companies. these banks are struggling so bad to survive and save themselves now a government body is asking them to save the municipal market while they are at it.
I think dinallo will have to make some kind of forced auction of their municipal insurance agreement portfolios and the cash injected on them will keep them triple AAA left with all the garbage CDOs and they will be paying claims for years trying to rebuild the business
 
SCA Scraps Plan to Raise New Capital
Wednesday January 23, 6:03 pm ET
SCA Decides to Scrap Plan to Raise New Capital, Raising Chances of a Downgrade


NEW YORK (AP) -- Security Capital Assurance Ltd. said Wednesday it has abandoned a plan to raise new capital, a decision that leaves the bond insurer's vital financial-strength ratings vulnerable to a downgrade.

Late last year, Fitch Ratings threatened to cut SCA's "AAA" financial-strength rating unless the company raised $2 billion. A downgrade could cripple the company's prospects for new business.

With $154 billion in insured debt outstanding, SCA writes insurance policies promising to reimburse bondholders when bond issuers default. Top-notch financial strength ratings are critical for bond insurers to win new business.

SCA in December unveiled a plan with several possible prongs to mollify Fitch, including selling stock and bonds.

The company's stock has plunged about 90 percent in the past few months and demand is scarce for debt issued by bond insurers.

"The unprecedented uncertainty and instability affecting our industry make it impractical to consider raising new capital at the present time," Chief Executive Paul S. Giordano said in a statement. "Pending greater clarity, we intend to continue pursuing the other components of our capital plan and consider all options available to us."

SCA said the parts of the plan the company does execute are not guaranteed to satisfy the ratings agencies. Aside from raising new capital, SCA had considered buying reinsurance for its policies and restructuring some deals.

This announcement comes less than a week after Ambac Financial Group Inc. scrapped plans to sell $1 billion in stock, prompting Fitch to downgrade the company.

MBIA Inc. managed to stave off a downgrade by selling $1 billion in bonds bearing an interest rate of 14 percent.

SCA's stock lost 44 cents, or 11.6 percent, to $3.35 in after-hours trading Wednesday. The stock closed at $3.79, having surged more than 75 percent on the day. The stock traded at $27.50 a year ago.
 
Quote from Cdntrader:


SCA said the parts of the plan the company does execute are not guaranteed to satisfy the ratings agencies. Aside from raising new capital, SCA had considered buying reinsurance for its policies and restructuring some deals.
More...

its unbelivable how can these guys can still try to mislead people. if their entire portfolio is giving them a huge margin call slicing the good parts(which should be few) wont came even close to addresing the issue. 'restructing some deals' now what the hell does that mean?
 
Quote from Daal:


I think dinallo will have to make some kind of forced auction of their municipal insurance agreement portfolios and the cash injected on them will keep them triple AAA left with all the garbage CDOs and they will be paying claims for years trying to rebuild the business
More...

hmm, there is a big problem with this. the rating agencies already take into account future premiums on their capital calculation. since the portfolio of municipal insurance agreements would be probably be actioned at a discount their capital shortfalls would grow even bigger, stock would plunge as this would price in book value write downs from the MUNICIPAL side! Even if there is no discount, they are left on the same situation but now alone with their cdos and writing no new business because everybody is scared their bankrupt
seems like these stocks are toast, unless there is federal money
 
Quote from Daal:

man, if thats all that dinallo proposed this is some very bad news for these companies. these banks are struggling so bad to survive and save themselves now a government body is asking them to save the municipal market while they are at it.
I think dinallo will have to make some kind of forced auction of their municipal insurance agreement portfolios and the cash injected on them will keep them triple AAA left with all the garbage CDOs and they will be paying claims for years trying to rebuild the business
More...

The more I think about it, the worse it is.

Lets consider for a minute that Dinallo is asking the BANKS for money. Wait? where are all the folks like Wilbur Ross or Buffett?? Does this mean they declined to do a deal with the bond insurers?

And if they declined where does that leave the banks? with a gun to their head from Dinallo telling them to pony up 15 bil to companies that have a combined market cap of 6 bil currently.

So the banks who are hoarding cash to maintain capital requirements from loan losses are gonna fork over 15 bil that the companies themselves wouldn't/couldn't raise?

So at the end of the day the banks prop up the insurers so the insurers can prop up the bank bonds so the banks don't fail? madness!

This makes NO sense!
 
if these stocks sells off hard on no news with some volume tomorrow then these banks traders know there is no plan and the world is ending. I will watch this closely, shareholders are supposed to be the most junior obligation there is, I think they will be the first sacrificed on this situation.
maybe there will be a debt issuance guaranteed by the treasury to infuse money on these companies, the northern rock situation is playing out that way so there is some precedent
 
Quote from Daal:

if these stocks sells off hard on no news with some volume tomorrow then these banks traders know there is no plan and the world is ending. I will watch this closely, shareholders are supposed to be the most junior obligation there is, I think they will be the first sacrificed on this situation.
maybe there will be a debt issuance guaranteed by the treasury to infuse money on these companies, the northern rock situation is playing out that way so there is some precedent
More...


Yes. I think the gov't HAS to guarantee these capital loans. Otherwise why would bank shareholders go along with it?
 
I want to say congrats to the OP, Cdntrader,

IT was your article FIRST posted on ET and then other places.

Your posting brought ABK to my attention and I made some serious cheese off it.

Thanks and Good Karma to u
 
You must log in or register to reply here.
Back
Top