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 One would think that I would get more respect out of the institutional circles...

From Bloomberg :

April 7 (Bloomberg) -- MBIA Inc. was sued by Third Avenue Management LLC, the New York company founded by mutual fund manager Martin Whitman, over claims the insurer’s split of its bond-insurance businesses hurts debt holders. See Is MBIA About to Pull the Wool Over the Market's Eyes?.  As a matter of fact, if you read "Super Scary Halloween Tale of 104 Basis Points Pt I & II, by Reggie Middleton" you shouldn't be touching this company with a teflon tipped ten foot pole. But then again, who listens to me???....

Three mutual funds managed by Third Avenue bought notes issued by MBIA Insurance Corp. in February 2008 based on assurances that the company was recapitalizing following losses in its structured finance insurance business, according to a statement distributed yesterday by PR Newswire. You really should have known better. You can't say I didn't warn you. See After Reading the Prospectus and Reviewing Potential Losses, Would You Buy These Notes?, MBIA goes back to the well again. Who will be silly enough to invest in these securities, though...  and A few more thoughts on MBIA, S&P and what AAA really means.

MBIA, the largest bond insurer by outstanding guarantees, said in February it was transferring $5 billion in cash and its public finance business to another entity that has no obligation to the notes, Third Avenue said in its statement. The lawsuit, filed in Delaware state court, alleges the transfers were illegal and unfair and seeks to unwind them, according to the statement.

“MBIA sold us these surplus notes, and then to our surprise and distress, stripped away the principal assets as well as the only going concern operations within MBIA Insurance Corporation,” Whitman, chairman of the Third Avenue funds, said in the statement. “That’s wrong, and a big disappointment to us, especially after we went to bat for them with our pocketbooks and more.” Again, I say, read my blog. See An analysis of mononline bifurcation vs. Buffet reinsurance.

Debt Guarantees

MBIA, based in Armonk, New York, said in February that it will split its municipal bond insurance business from the mortgage-related debt guarantees that led to the loss of its top credit ratings.

The company transferred guarantees on about $537 billion of municipal bonds to MBIA Insurance Corp. of Illinois, which it plans to rename National Public Finance Guarantee Corp.

The new unit will be separate from an existing one that guarantees complex mortgage-linked securities and other debt, which plunged in value during the U.S. housing and credit crises, prompting a 92 percent drop in the company’s shares since October 2007 and the ouster of its chief executive a year ago.

MBIA’s actions were legal and the Third Avenue’s lawsuit is without merit, MBIA Chief Executive Jay Brown said yesterday in an e-mailed statement.

“We appreciate Third Avenue’s past support of MBIA and regret that they felt” the lawsuit was necessary,” Brown said. “Our transformation should not have been a surprise, however, as I have been clear to all stakeholders since I returned a year ago that our corporate objective was to separate our structured and municipal businesses.” He's got a point here. Let me translate: I threw the sucker punch, and these sucker's are catching a 'tude 'cause I played them for suckers! I'm glad nobody paid attention to that blogger guy back in '07 with that scary Halloween story!

The filing of the lawsuit couldn’t be independently confirmed through court records. Brian Maddox, a spokesman for New York-based Third Avenue, didn’t return a voice-mail message left after hours.


1. MBIA in the news recently... I am not going to say I told you so.
(Archived/Reggie Middleton's Boom Bust Blog/MyBlog)
...ent to attract greater interest, according to investors familiar with the deal on Friday. The issue of so-called surplus notes by MBIA Insurance Corp. is part of an effort by the bond insurer to buoy ...
Saturday, 12 January 2008

2. After Reading the Prospectus and Reviewing Potential Losses, Would You Buy These Notes?
(Archived/Reggie Middleton's Boom Bust Blog/MyBlog)
...o;), a wholly-owned subsidiary of MBIA Inc. (the “Company”), issued $1.0 billion principal amount of Surplus Notes due January 15, 2033 (the “Notes”) with an initial interest r...
Thursday, 17 January 2008

3. Is MBIA About to Pull the Wool Over the Market's Eyes?
(Reggie Middleton's Boom Bust Blog/MyBlog)
... The doubt about MBIA's solvency hurts stakeholders by reducing the value of MBIA's common shares, debt, and surplus notes, and severely diminishing the market value of credit enhancement provided...
Sunday, 22 February 2009

4. Fitch finally found my blog and cut Ambac's rating, So what's next...
(Archived/Reggie Middleton's Boom Bust Blog/MyBlog)
...s know you weren't a AAA risk. Let's stop the shenanigans, please... MBIA's surplus notes plunged as low as 70 cents on the dollar yesterday, indicating a yiel...
Saturday, 19 January 2008

5. MBIA goes back to the well again. Who will be silly enough to invest in these securities, though...
(Archived/Reggie Middleton's Boom Bust Blog/MyBlog)
...e it. Let's see who'll be silly enough to actually buy these!  I browsed through the prospectus of the last surplus notes offering and found that anyone who actually read the prospectus would hav...
Thursday, 07 February 2008

6. A few more thoughts on MBIA, S&P and what AAA really means
(Archived/Reggie Middleton's Boom Bust Blog/MyBlog)
Observation: MBIA is forced to borrow at deep junk rates (14%) in a 7% environment (surplus notes have a slight premium). These notes then go on to trade at an immediate discount, yielding 20%.
Tuesday, 26 February 2008

7. An analysis of mononline bifurcation vs. Buffet reinsurance
(Archived/Reggie Middleton's Boom Bust Blog/MyBlog)
 The following is an interesting commentary forwarded by one of the boombustblog readers. I am enthused at the level of knowldege and common sense prevalent in this community. It really mak
Thursday, 28 February 2008

(Archived/Reggie Middleton's Boom Bust Blog/MyBlog)
The following is the MBIA "LETTER TO OWNERS DATED MARCH 3, 2008" excerpt and my comments. My next post will be my comments on out ongoing monoline research, and in particular Assured Guarant
Thursday, 06 March 2008

9. This company needs to be put out of its misery
(Archived/Reggie Middleton's Boom Bust Blog/MyBlog)
I haven't written much about MBIA lately, primarily because I had closed my bearish position on them at about $9 per share. This was originally initiated in the $60's last year, and really intensifi
Monday, 12 May 2008

10. More on MBIA Surplus Notes
(Forum/Insurers and Insurance)
I was just reminded that surplus notes, in addition to their preferential treatment as quasi-equity, share the equity like attribute of being 2nd tier to superior claims - such as that brought down fr
Sunday, 13 January 2008

11. Re:More on MBIA Surplus Notes
(Forum/Insurers and Insurance)
...dings Plc, Europe?s biggest bank by market value, set up a collateralized debt obligation to repackage so-called surplus notes sold by insurance companies to bolster capital, according to Standard &am...
Friday, 18 January 2008