And it’s not just the fact of MBIA’s triple-A rating that drives Mr. Ackman batty; it’s its transcendent importance to the company’s business. As Gary. Following New York and U.S. probes of his trading and reports, Ackman persisted in challenging MBIA’s AAA credit rating for more than five. That AAA rating being essential to MBIA staying afloat as a bond insurer. Later on Thursday, Bill Ackman, of Pershing Square – the massively.

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A consortium of insurance companies AetnaFireman’s FundTravelersCignaand Continental formed the Municipal Bond Insurance Association in to diversify their holdings in municipal bonds. Net operating loss carryforwards are not cash and are not available to pay claims and should therefore not be ackan from losses in calculating bond insurer capital adequacy.

Substantially all of these premiums are from structured finance guarantees.

Can this possibly make sense? The liquidity risks of these programs and the underlying assets should be carefully examined. Following New York and U. His law firm charged him for copyingpages of financial statements and other documents,of them about MBIA, to comply with a subpoena.

Ackan may soon be proved right. In the MBIA documents, Ackman says he saw that the insurer was guaranteeing untested asset-backed securities. The letter arrived only after he wrote to mboa SEC chairman and the agency’s four commissioners demanding it. The San Francisco Chronicle. There is also no mechanism whereby the bond insurers can borrow against these potential future premiums to be used to pay claims in the present day.

It was founded in as the Municipal Bond Insurance Association. Straight out of business school, Ackman started his first hedge fund, Gotham Partners, with fellow student David Berkowitz. In that the losses are occurring primarily on structured finance obligations, these lines of credit should not be included in CPR The Capital Base included in CPR is also likely to be overstated because the investment assets of the bond insurers consist primarily of bond insurer guaranteed obligations that are valued inclusive of the guarantee, when they should be valued on an unwrapped basis.


The company went public in Financial insurance or Financial Guarantees are a form of credit enhancement. Please call me if you have any questions about the above. You should also carefully calculate the impact of a downgrade of the bonds held by one bond insurer that are guaranteed by other insurers in your calculation of capital adequacy. Marty Whitman can call him what he wants, but the guy knows his stuff. You should receive assurances from MBIA and require it to contribute the full billion dollars to its insurance subsidiaries before you include the funds in calculating insurance company capital.

The swaps would rise in value if doubts about MBIA grew. Ackman earned undergraduate and business degrees from Harvard.

Bond Insurer Ratings Ladies and Gentlemen: Your analysis makes the aggressive assumption that the bond insurers will remain going concerns and will therefore be able to continue to write new premiums and generate income in the future. Fitch Ratings 99 Church St. This is prima facie evidence that your ratings of MBIA are overstated.

Webarchive template wayback links. We believe a shareholder vote and approved registration statement will likely be required in such a circumstance, delaying the ability to consummate the transaction beyond the March 31st Warburg backstop drop dead date. Your updated rating assessments should be adjusted to exclude tax benefits in your calculation of capital adequacy 2 Covenant Violations and Loss of Access to Liquidity Facilities As a result of recent losses, both MBIA and Ambac have triggered covenant violations on their liquidity facilities.

We believe that both MBIA and Ambac have substantial collateral posting obligations in the event of a holding company downgrade. Ackman had warned that MBIA was magnifying its risks by backing instruments such as those based on loans to the least creditworthy homebuyers. Most bond insurer holding companies have limited cash, have lost or will lose access to liquidity facilities, and have substantial cash needs for interest payments, operating expenses, and dividends for so long as they continue to be paid.


Ackman’s Letter to Moody’s: A Must Read

Inas the New York attorney general’s probe was under way, Ackman fired off a memo to MBIA posing questions he says the company never answered. When MBIA did, in fact, crash as the financial crisis of came to a head, mbka sold the swaps for a large profit.

Ackman is a slick acckman who doesn’t know much about insurance,” Whitman said. MBIA is a monoline insurer primarily of municipal bonds and on asset-backed securities and mortgage-backed securities.

MBIA – Wikipedia

A bond insurer is only able to obtain tax benefits if the insurer is a going concern and is able to generate sufficient taxable income in the current or future years to offset the losses from paid insurance claims. Retrieved November 2, He also found ackmxn reinsurance transaction that allowed the company to downplay a loss.

Views Read Edit View history. While ackmman rating agencies have not updated their credit ratings of Ram Re, the market appears to have already done so. Ackman learned in January from a Wall Street Journal reporter that Spitzer was investigating whether Gotham mbla engaged in manipulative trading on MBIA and other companies and that the newspaper would publish an article the next day.

Unfortunately, however, your previous ratings assessments have erred materially in their omission of certain critical analysis and the inclusion of outright errors in your work.

Todd Sullivan’s – ValuePlays. Whitman’s firm owned more than 10 percent of MBIA’s stock, he said in the interview.

As you well know, depression lines of credit can only be acoman to pay claims on municipal obligations and only after a substantial deductible. The impact of the loss of these facilities is material to the liquidity profile of the holding companies and their insurance subsidiaries and must be considered in your credit assessment.

As usual, I will make myself available at your convenience.