MBIA

Are we in for more sponsor PIPEs?

Jim Kim — Wed, 19 Nov 2008 11:18:03 -0500

The private equity industry unfortunately has a long history of train wrecks when it comes to private investments in public entities (PIPEs). The most recent: TPG Capital's $1.35 billion loss on its disastrous investment in Washington Mutual. Other worrisome financial deals include Warburg Pincus' $800 million investment in MBIA. But TheDeal.com notes that so far this year an "astonishing" $180 billion worth of PIPEs have been placed. Of that, sponsors invested about $19.1 billion, or 11 percent, compared with just $3.4 billion of last year's $84 billion total (PlacementTracker). It's fair to say the industry has a love-hate relationship with the concept. While PIPEs are hardly ideal, the fact is such deals remain a decent option if you want to deploy capital right now. Full-on buyouts are all but impossible given the financing situation. So we may see more PIPE deals soon.

For more:
- here's the article from TheDeal.com

Related Articles:
Private equity news from FierceFinance

The greatest short bets of all time

Jim Kim — Mon, 11 Aug 2008 10:06:29 -0400

When John Paulson, of Paulson & Co., bet against mortgage-backed collateralized debt obligations, he didn't hold back. His funds shorted the ABX and longed various credit default swaps--and it paid off. His $15 billion profit in 2007 is the stuff of legends. According to Business Week Online, it ranks up there with the greatest short bets of all time. George Soros is mentioned for his now legendary bet against the British pound just before it dropped out of a fixed exchange rate system. His $1 billion gain in 1992 gave him the title of "The Man Who Broke the Bank of England." Then there's Jim Chanos, the famous short, who bet correctly that Enron would collapse. Bill Ackman is noted for his big winning bet that MBIA' stock would tank.

For more:
- here's the package

Full impact of bond insurer downgrades not yet felt

Jim Kim — Wed, 02 Jul 2008 09:40:10 -0400

The Financial Times notes that banks have yet to feel the full brunt of the impact from the recent downgrades of bond insurers. There likely will be more writedowns stemming from credit default swaps (CDSs) meant to be insurance--what cruel irony--against various collateralized debt obligations (CDOs). So far, the banks have taken $25.7 billion in writeoffs. That, however, reflects downgrades from a handful of relatively small bond insurers. The big boys--MBIA and Ambac--were downgraded more recently. Banks have not yet taken action on these downgrades, but they will soon enough. The only issue is, how much? Just one more reason for pessimism. As the Times notes, these writeoffs will come on top of writeoffs related to the CDOs themselves.

For more:
- here's the Financial Times item

MBIA CDS drama plays out

Jim Kim — Wed, 18 Jun 2008 07:37:39 -0400

At some point, an institution becomes so shaky that it actually becomes a form of leverage with regulators. MBIA is a great case in point. The New York Times notes that in early May, MBIA promised to inject $900 million into its troubled insurance unit, which had underwritten nearly $140 billion in credit default swaps. But MBIA has yet to make the payment, and New York State regulators have to tread lightly. An overt regulatory takeover could really upend the still precarious CDS market, unleashing pain on many. The move may hurt MBIA's credibility. By not recapitalizing the unit, it certainly makes more people wonder if the bank is, in a sense, resigning itself to a bad outcome with its insurance unit. The fear is that people start demanding payment on contracts en masse. It's unclear if the contacts allow this. This is high stakes poker folks.

For more:
- here's the Times article

William Ackman's bet against MBIA: A winning move?

Wed, 14 May 2008 06:59:55 -0400

One of the most publicized of the bond insurance bears was William Ackman of Pershing Square Capital Management, who pressed his case in part with presentations given over the Internet. He received lots of press, and by some measures seems to be winning, especially when it comes to MBIA (which reported another loss and another writedown--this one for $3.6 billion). Before that, the company already had taken $3.7 billion on writedowns for last year. According to HedgeFund.net, Ackman expects the company to ultimately writedown $11 billion on structured credit products. At some point, you would think the shorts would bail. Indeed, the stock got a little goose Monday. Time for a big decision in general for a lot of shorts.

For more:
- here's the article

ALSO NOTED: Bankers moving from denial to depression?; Hedge funds rebound in April; and much more...

Thu, 08 May 2008 06:59:50 -0400

Company News:
> Allied Capital posts big loss. Article
> Legg Mason prices equity units. Article
> MBIA says its capital is adequate. Article
> BlackRock CEO gives $10 million to college. Article
> Bear Stearns stockholders withdraw injunction request in JPMorgan suit. Article
> Lehman upgrades MF Global. Article

Industry News:
> Icahn raises stake in Motorola to 7.6 percent. Article
> Hedge funds rebound in April. Article
> Monet painting sold for $41 million. Article
> Bankers moving from denial to depression? Article

Regulatory News:
> Congress looks at SEC oversight of Wall Street. Article
> SEC calls for more oversight. Article

And Finally... How airline mergers will affect your travel. Article

More on private equity and banks

Fri, 11 Apr 2008 06:59:56 -0400

Private equity funds traditionally have not had a lot of time for public investments (not enough control for them) and financial service firms (not the right business model). But the Washington Mutual deal, as we've noted, may change that. Fortune weighs in with an article that notes other private equity firms may take the plunge. National City is reportedly in talks for a deal with KeyCorp, which might involved some cash put up by Kohlberg Kravis Roberts. There are risks of course. Fortune notes that Warburg Pincus took a bath on its investment in MBIA. But the numbers may be too tempting, especially given a lack of other opportunities, and the big funds have got to put their money to work.

For more:
- here's the article

Bond insurer to Fitch: Don't rate us

Wed, 12 Mar 2008 07:59:56 -0400

A sign of the times: Ailing bond insurer MBIA has taken credit-rating agency Fitch to task for not being more tough on muni bond insurers, notes Fortune. The firm made waves when it asked Fitch to stop rating its debt. In another letter, it said Fitch simply does not require enough capital of muni bond insurers. Neither side has come off looking good in the bond insurer meltdown, but there is some irony in MBIA calling for tougher standards on itself. The real goal seems to be to keep competitors from gaining a foothold as MBIA splits itself in two. We'll see how this plays out.

For more:
- here's the Fortune article

Related Articles:
Ambac to split, others to follow. Article
Is a break up of bond insurers inevitable? Article
S&P, Fitch weigh in on financial institutions. Article