BAILOUT? - New York Insurance Superintendent watching bond insurers, may intervene
- Thread starter Cdntrader
- Start date
How have you done trading those two stocks in the past few months?
I've traded both, but only when i was long and thankfully ended up doing pretty well thus far.
February 28, 2008, 4:30 pm
Warburg/MBIA Case Study: Buy Cheap, and Be Patient
Posted by Shasha Dai
wsj.com
Even before Warburg Pincus officially agreed to injected $500 million into embattled bond insurer MBIA, its investment was already under water.
Still, that doesnât seem to worry Warburg. âThe public market tends to over-react in the short term,â said a person close to the firm. âThatâs why private-equity firms can perform well taking a long-term view.â
If history is any guide, Warburg may have a very long-term view on this one. Consider its capital infusion in 1999 into Mellon Bank, then saddled with bad loans. Mellon initiated what was called a âgood bank, bad bankâ restructuringâinterestingly, the same moniker for a suggested rescue of bond insurer Ambac Financial Groupâwhereby Mellon transferred loans of $1 billion in face value to a separate entity, called Grant Street National Bank, a.k.a. the âbad bank.â The remainder Mellon became the âgood bank,â which raised fresh capital including $158 million from Warburg. The PE firm believed that, deprived of bad loans, Mellon would have a cleaner balance sheet and be better focused.
Led by Chief Executive Frank Cahouet, a banking industry outsider, Mellon began a transformation into a consumer bank from a money-center bank, an old business model that had contributed to many of its bad loans. Two years into Warburgâs investment, the firm was about break even. Warburg waited another eight years to fully sell down its holdings, during which period Mellonâs stock price increased 10 fold.
Warburgâs original $158 million ultimately produced $1.47 billion, or a compound 30% annual return over a 10-year period, according to a brochure provided by the firm.
Buying cheap certainly didnât hurt either. At the time of the Mellon deal, some analysts estimated Warburgâs investment was priced 20% or more below Mellonâs market value, a proposition Mellon disputed.
In MBIA, Warburg believes it also has found a bargain. It paid an average of $19.60 a share, and including the value of roughly 25 million warrants Warburg was granted its total buy-in price is estimated to be approximately $15, according to the person close to the firm. (MBIA traded around $14 in early afternoon trading today.)
âThe underlying thesis for MBIA and Mellon are similar,â this person says. âBoth are undervalued assets that were bought at meaningful discounts to embedded value.â
http://blogs.wsj.com/deals/2008/02/...-buy-cheap-and-be-patient/?mod=googlenews_wsj
Warburg/MBIA Case Study: Buy Cheap, and Be Patient
Posted by Shasha Dai
wsj.com
Even before Warburg Pincus officially agreed to injected $500 million into embattled bond insurer MBIA, its investment was already under water.
Still, that doesnât seem to worry Warburg. âThe public market tends to over-react in the short term,â said a person close to the firm. âThatâs why private-equity firms can perform well taking a long-term view.â
If history is any guide, Warburg may have a very long-term view on this one. Consider its capital infusion in 1999 into Mellon Bank, then saddled with bad loans. Mellon initiated what was called a âgood bank, bad bankâ restructuringâinterestingly, the same moniker for a suggested rescue of bond insurer Ambac Financial Groupâwhereby Mellon transferred loans of $1 billion in face value to a separate entity, called Grant Street National Bank, a.k.a. the âbad bank.â The remainder Mellon became the âgood bank,â which raised fresh capital including $158 million from Warburg. The PE firm believed that, deprived of bad loans, Mellon would have a cleaner balance sheet and be better focused.
Led by Chief Executive Frank Cahouet, a banking industry outsider, Mellon began a transformation into a consumer bank from a money-center bank, an old business model that had contributed to many of its bad loans. Two years into Warburgâs investment, the firm was about break even. Warburg waited another eight years to fully sell down its holdings, during which period Mellonâs stock price increased 10 fold.
Warburgâs original $158 million ultimately produced $1.47 billion, or a compound 30% annual return over a 10-year period, according to a brochure provided by the firm.
Buying cheap certainly didnât hurt either. At the time of the Mellon deal, some analysts estimated Warburgâs investment was priced 20% or more below Mellonâs market value, a proposition Mellon disputed.
In MBIA, Warburg believes it also has found a bargain. It paid an average of $19.60 a share, and including the value of roughly 25 million warrants Warburg was granted its total buy-in price is estimated to be approximately $15, according to the person close to the firm. (MBIA traded around $14 in early afternoon trading today.)
âThe underlying thesis for MBIA and Mellon are similar,â this person says. âBoth are undervalued assets that were bought at meaningful discounts to embedded value.â
http://blogs.wsj.com/deals/2008/02/...-buy-cheap-and-be-patient/?mod=googlenews_wsj
looks like Ross avoiding the toxic side of abk mbi. More competition for the weak players. perhaps they'll reinsure more of abk mbi's commitments.
Assured Guaranty Ltd. Announces Commitment by Wilbur Ross to Purchase Up to $1 Billion of Common Equity
Friday February 29, 6:00 am ET
HAMILTON, Bermuda--(BUSINESS WIRE)--Assured Guaranty Ltd. (NYSE:AGO - News) (âAssuredâ or âthe Companyâ) announced today that it has signed an agreement for WL Ross & Co. LLC (âWL Rossâ) to purchase $250 million of common shares of Assured and to provide a commitment to purchase up to $750 million of additional common shares of Assured at the option of the Company. The closing of the initial $250 million investment is subject to regulatory approvals and other customary conditions. The closing of any subsequent investments will require shareholder approval, which the Company will request at its 2008 annual general meeting.
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âWe are extremely pleased that Wilbur Ross has chosen Assured as his preferred investment vehicle in the financial guaranty industry,â commented Dominic Frederico, President and Chief Executive Officer of Assured Guaranty Ltd. âThis flexible capital source will allow us to continue to capitalize on the significant growth opportunities we see and will support our further expansion in both the direct and reinsurance markets.â
Wilbur Ross, Chairman and Chief Executive Officer of WL Ross & Co. LLC stated, âWe believe that Assured has an excellent opportunity during this time of uncertainty in the financial markets to provide investors with credit enhancement products in both the public and structured finance markets. We look forward to a long and profitable association with Assured.â
The purchase price per common share for the initial investment will be the higher of (i) 97% of the average of $22.43 (the Companyâs NYSE closing price on Friday, February 22, 2008) and the average NYSE closing price for Friday, February 29, 2008 and Monday, March 3, 2008, or (ii) $21.76 (97% of $22.43). A condition to closing the initial investment is that Wilbur Ross, Chairman and Chief Executive Officer of WL Ross, will be appointed to the Companyâs Board of Directors.
The additional $750 million commitment by WL Ross is available at the option of the Company for one year from the date of the closing of the $250 million investment. The price for subsequent investments will be 97% of the volume weighted average price of the Companyâs common shares for the 15 trading days prior to notice of any subsequent investment. The ability of Assured to make a mandatory draw on the $750 million commitment is subject to (i) the subsequent investment price of Assuredâs common shares being no more than 17.5% above or below the price per common share of the initial investment, (ii) the maintenance of triple-A (stable) ratings for Assured Guaranty Corp. and double-A (stable) ratings for Assured Guaranty Re Ltd. from Standard & Poorâs, Moodyâs and Fitch and the absence of material adverse changes in the credit quality of the Companyâs financial guaranty portfolio and investment portfolio from the most recently publicly disclosed information at the time of a drawdown.
Merrill Lynch & Co. acted as exclusive financial advisor to Assured on this transaction.
Assured Guaranty Ltd. is a publicly-traded Bermuda-based holding company. Its operating subsidiaries provide credit enhancement products to the U.S. and international public finance, structured finance and mortgage markets. More information on the Company and its subsidiaries can be found at www.assuredguaranty.com.
Assured Guaranty Ltd. Announces Commitment by Wilbur Ross to Purchase Up to $1 Billion of Common Equity
Friday February 29, 6:00 am ET
HAMILTON, Bermuda--(BUSINESS WIRE)--Assured Guaranty Ltd. (NYSE:AGO - News) (âAssuredâ or âthe Companyâ) announced today that it has signed an agreement for WL Ross & Co. LLC (âWL Rossâ) to purchase $250 million of common shares of Assured and to provide a commitment to purchase up to $750 million of additional common shares of Assured at the option of the Company. The closing of the initial $250 million investment is subject to regulatory approvals and other customary conditions. The closing of any subsequent investments will require shareholder approval, which the Company will request at its 2008 annual general meeting.
ADVERTISEMENT
âWe are extremely pleased that Wilbur Ross has chosen Assured as his preferred investment vehicle in the financial guaranty industry,â commented Dominic Frederico, President and Chief Executive Officer of Assured Guaranty Ltd. âThis flexible capital source will allow us to continue to capitalize on the significant growth opportunities we see and will support our further expansion in both the direct and reinsurance markets.â
Wilbur Ross, Chairman and Chief Executive Officer of WL Ross & Co. LLC stated, âWe believe that Assured has an excellent opportunity during this time of uncertainty in the financial markets to provide investors with credit enhancement products in both the public and structured finance markets. We look forward to a long and profitable association with Assured.â
The purchase price per common share for the initial investment will be the higher of (i) 97% of the average of $22.43 (the Companyâs NYSE closing price on Friday, February 22, 2008) and the average NYSE closing price for Friday, February 29, 2008 and Monday, March 3, 2008, or (ii) $21.76 (97% of $22.43). A condition to closing the initial investment is that Wilbur Ross, Chairman and Chief Executive Officer of WL Ross, will be appointed to the Companyâs Board of Directors.
The additional $750 million commitment by WL Ross is available at the option of the Company for one year from the date of the closing of the $250 million investment. The price for subsequent investments will be 97% of the volume weighted average price of the Companyâs common shares for the 15 trading days prior to notice of any subsequent investment. The ability of Assured to make a mandatory draw on the $750 million commitment is subject to (i) the subsequent investment price of Assuredâs common shares being no more than 17.5% above or below the price per common share of the initial investment, (ii) the maintenance of triple-A (stable) ratings for Assured Guaranty Corp. and double-A (stable) ratings for Assured Guaranty Re Ltd. from Standard & Poorâs, Moodyâs and Fitch and the absence of material adverse changes in the credit quality of the Companyâs financial guaranty portfolio and investment portfolio from the most recently publicly disclosed information at the time of a drawdown.
Merrill Lynch & Co. acted as exclusive financial advisor to Assured on this transaction.
Assured Guaranty Ltd. is a publicly-traded Bermuda-based holding company. Its operating subsidiaries provide credit enhancement products to the U.S. and international public finance, structured finance and mortgage markets. More information on the Company and its subsidiaries can be found at www.assuredguaranty.com.
Ambac estimates Jan derivatives losses at $650 mln
Fri Feb 29, 2008 7:54pm EST
NEW YORK, Feb 29 (Reuters) - Ambac Financial Group Inc (ABK.N: Quote, Profile, Research) said on Friday that the market value of its credit derivatives fell about $650 million in January, and declines in value continued into February.
Ambac wrote down the value of its credit derivatives contracts by $6 billion in 2007, creating a net loss of $3.248 billion for the year.
Ambac also said that as assets it has guaranteed using credit derivatives are downgraded, it may have to raise additional capital to support its exposure, or limit its writing of new business.
Fri Feb 29, 2008 7:54pm EST
NEW YORK, Feb 29 (Reuters) - Ambac Financial Group Inc (ABK.N: Quote, Profile, Research) said on Friday that the market value of its credit derivatives fell about $650 million in January, and declines in value continued into February.
Ambac wrote down the value of its credit derivatives contracts by $6 billion in 2007, creating a net loss of $3.248 billion for the year.
Ambac also said that as assets it has guaranteed using credit derivatives are downgraded, it may have to raise additional capital to support its exposure, or limit its writing of new business.
