3:30 ET (Bloomberg) MBIA Bond Default Risks Widen on Warning from Moody's.
Moody's: second lien RMBS woes may dent bond insurer ratings
3:36 PM EDT May 13, 2008
SAN FRANCISCO (MarketWatch) -- Poor performance of second lien residential mortgage-backed securities (RMBS) could impact the credit ratings of bond insurers, Moody's Investors Service said on Tuesday. Bond insurers have significant exposure to second lien RMBS, mainly through guaranties on the securities and, to a lesser extent, through exposure to collateralized debt obligations backed by such assets, the rating agency noted. "Moody's loss expectations for this asset class are higher than previously anticipated, owing to worse-than-expected performance trends," the agency explained. "This could have material implications for the estimated capital adequacy of financial guarantors most exposed to this risk." MBIA shares fell 5% to $9.36 during afternoon trading, while Ambac Financial dropped 7% to $4.03.
Remember how the other day we laughed when MBIA rallied on its tremendous loss and noted the spin being put on the stock by the Wall Street pundits?
A cursory examination of the financials and their context indicates the company is functionally bankrupt, and has to be rescued to remain in business. That is not out of the question of course, but the rally that took it up yesterday was a joke in a dull market.
Well today the wheel turns, and MBIA is being sold off hard on a caution at 3 PM from Moody's about the future of their credit rating, essential to their continued business, and analyst downgrades from this morning.
Under the benign neglect of the Bush Administration in particular Wall Street has become the heart of deception as a way of life, a shame and corrupting influence on the Republic.
May 13, 2008, 4:24 pm
Ratings questions return at MBIA, Ambac
Fortune Magazine
The triple-A ratings at bond insurers MBIA (MBI) and Ambac (ABK) could soon be under scrutiny again. Moody’s said Tuesday that rising losses on bonds backed by second mortgages could hit ratings at insurers that have guaranteed second-lien residential mortgage-backed securities.
“Moody’s now expects 2005 vintage subprime second lien pools to lose 17% on average, 2006 vintage pools to lose 42% on average, and 2007 pools to lose 45% on average,” Moody’s said. “Moody’s loss expectations for this asset class are higher than previously anticipated, owing to worse-than-expected performance trends. This could have material implications for the estimated capital adequacy of financial guarantors most exposed to this risk.”
The comments come a day after MBIA posted a $2.4 billion first-quarter loss but spent much of a two-and-half-hour conference call explaining why it doesn’t believe it will need to come to market to raise more capital. CEO Jay Brown told investors he believes the company can make up a $1.7 billion shortfall relative to Moody’s triple-A capital targets over the next two quarters, through he conceded he doesn’t expect the company to get a stable outlook until house prices bottom out, which he said probably won’t happen till at least next year. The improved outlook may be even further off now, given Moody’s comments Tuesday. “Moody’s intends, in the short term, to assess whether worsening performance in this sector is likely to be material for exposed financial guarantors, and will update the market as appropriate,” the rating agency said.AP
Ahead of the Bell: MBIA
Tuesday May 13, 9:13 am ET
MBIA edges up in premarket trading, but analyst lowers estimates after 1st-quarter loss
NEW YORK (AP) -- A Friedman Billings Ramsey analyst is cutting his estimates on bond insurer MBIA Inc., pointing to the company's large first-quarter loss and difficult competition.
Steve Stelmach said MBIA's reserves may not be enough to cover deteriorating credit and write-downs, as its losses in the first quarter were larger than expected. He now expects the company to lose $1.89 per share this year. Previously he expected a profit of $2.05 per share. Stelmach now predicts a smaller profit in 2009.
He cut his price target to $13 per share from $16 and kept a "Market Perform" rating on the stock.
The analyst added that competitors like Berkshire Hathaway and Assured Guaranty have not suffered from mortgage and debt issues the way MBIA has.
MBIA said Monday that it swung to a first-quarter loss, but shares rose 4.5 percent. In premarket electronic trading, they gained another 13 cents, to $9.98 from $9.85.
