Tags: MBIA | Shares | Puerto | Rico | Default

MBIA Shares in Prolonged Slide Amid Puerto Rico Default Concern

Tuesday, 08 Jul 2014 04:56 PM

Shares of MBIA Inc. fell for a 13th day on Tuesday, marking the bond insurer’s longest streak of declines since going public in 1987 amid concerns it faces losses tied to guarantees on Puerto Rico’s debt.

MBIA, based in Armonk, New York, tumbled as much as 5.8 percent, touching the lowest since May 2013 before climbing back to close down 3.5 percent at $9.65 in New York. Bermuda-based competitor Assured Guaranty Ltd. also extended a decline Tuesday, falling 1.7 percent to close at $22.71, after trading at $22.63, the lowest since February. It was the stock's 11th drop in 12 days.

MBIA, with $4.8 billion of net exposure, and Assured, with $5.3 billion across three units, are sinking on their Puerto Rico guarantees after surviving U.S. mortgage losses that toppled other bond insurers during the financial crisis. After lawmakers in the self-governing U.S. territory last month approved a bill allowing some public corporations to restructure debt, prices on the commonwealth’s bonds have dropped to record lows.

The law “creates a path for a possible distressed restructuring for certain government-related enterprises and raises questions about Puerto Rico’s credit conditions and willingness to pay its debt,” Moody’s Investors Service analyst Stanislas Rouyer wrote in a report Monday. “We view the probability of a Puerto Rico default as substantially more likely than we did several months ago.”

Electric Utility

The exposure of MBIA’s National Public Finance Guarantee unit to the troubled Puerto Rico Electric Power Authority, the island’s main provider of electricity, equaled 46 percent of its qualified statutory capital as of March 31, according to Moody’s. The new law is “most imminently applicable” to Prepa, the ratings firm said. The ulitity said yesterday it had negotiated with creditors to push off repayment of bank loans until July 31.

Kevin Brown, a spokesman for MBIA, declined to comment, as did Robert Tucker, a managing director for investor relations at Assured.

Shares of the bond insurers could rise if the U.S. government offered assistance to Puerto Rico or if the new law were ruled unconstitutional, Mark Palmer, an analyst at BTIG LLC, wrote in a note to clients. The analyst cut MBIA shares last week to “neutral” from “buy,” a recommendation he had on the stock since at least 2011, according to data compiled by Bloomberg.

Funds controlled by billionaire Wilbur Ross sold 10.8 million of Assured shares at $24 each to end his stake in the company, according to a July 1 securities filing. Ross started backing the insurer in February 2008 as mortgage losses began hobbling the industry. Moody’s said the insurers’ ability to regain investor confidence may be damaged by losses in Puerto Rico.

© Copyright 2017 Bloomberg News. All rights reserved.

 
1Like our page
2Share
InvestingAnalysis
Shares of MBIA Inc. fell for a 13th day on Tuesday, marking the bond insurer's longest streak of declines since going public in 1987 amid concerns it faces losses tied to guarantees on Puerto Rico's debt.
MBIA, Shares, Puerto, Rico, Default
443
2014-56-08
Tuesday, 08 Jul 2014 04:56 PM
Newsmax Inc.
 

Newsmax, Moneynews, Newsmax Health, and Independent. American. are registered trademarks of Newsmax Media, Inc. Newsmax TV, and Newsmax World are trademarks of Newsmax Media, Inc.

NEWSMAX.COM
MONEYNEWS.COM
© Newsmax Media, Inc.
All Rights Reserved