Tuesday, February 5, 2008

Monoline Insurer Timeline

The following time line is from the WSJ's Marketbeat blog. I've been a bit behind the curve on this issue, so this time line was great way to catch-up.

* Oct. 24-25, 2007: Ambac reports a big loss in its most recent quarter, followed a day later by the announcement of losses at MBIA.

* Nov. 1: Standard & Poor’s says it is unlikely to downgrade credit ratings on the highly-rated insurers, as a result of the big markdowns they took on their credit derivatives portfolios during the third quarter. (Note: statements from the ratings agencies in this time period prove to be variable.)

* Nov. 6: In response to a report from Morgan Stanley questioning the company’s financials and whether it will end up realizing more losses from the debts insured, Ambac says it is “confident in the quality of our internal credit ratings process,” and that “we have been very transparent to the market and our investors by disclosing significant detail on our direct mortgage and CDO exposure in our various public disclosures.”

* Nov. 7: Ambac holds a conference call to reassure investors. Robert Genader, Ambac’s chief executive officer, says on a conference call that his company is misunderstood despite its balance sheet not being hurt by the subprime-market turmoil. Mr. Genader said he hoped to “restore faith in the credit-underwriting skills…that this company has displayed for more than 35 years.”

Dec. 6: Moody’s Investors Service said that it considers MBIA “somewhat likely” to fall short of its capital requirements. Investors seize on this, since Moody’s held a different view about one month earlier.

* Dec. 11: Private-equity firm Warburg Pincus agrees to commit as much as $1 billion to MBIA to help boost the financial guarantor’s capital level, and help head off a downgrade of its triple-A credit rating.

* Dec. 13 - Ambac is named Monoline of the year by International Securitisation Report.

* Dec. 14: Moody’s affirms the rating of MBIA at AAA, but changes the outlook to “negative.” It also affirms the AAA-rating of Ambac.

* Dec. 17: Bill Ackman of New York hedge fund Pershing Square Capital Management LLC, a long-time critic of the insurers, says Moody’s actions should be described as “creeping incrementalism.” The ratings firm doesn’t want “to be the causal factor for these companies blowing up,” he says. “They’re giving them yet another warning.”

* Dec. 19: Standard & Poor’s has another warning — cutting the ratings of rival bond insurer ACA Financial Guaranty (which only had a single-A rating to begin with) to junk status. It also puts a negative outlook on Ambac.

* Dec. 20: MBIA shares slump after the guarantor, on its Web site, discloses $8.1 billion in exposure to complex and risky securities backed by home loans.

* Dec. 21: Ambac is put on a rating watch by Fitch Ratings, a competitor to Moody’s and Standard & Poor’s.

* Jan. 9: MBIA says it plans to raise $1 billion by issuing a kind of debt known as surplus notes.

* Jan. 15: MBIA says it plans on cutting its stock dividend by 62%, which would result in $80 million in cash savings a year, and that it reinsured some of its portfolio, which would reduce its capital requirement by as much as $150 million.

* Jan. 16: Seeking to reassure investors, Michael Callen, CEO of Ambac, says the firm has “great confidence in our plan to enhance Ambac’s capital position by over $1 billion within an accelerated time frame.” In a change of heart, however, Moody’s Investor Service says it is placing Ambac on watch for possible downgrade.

* Jan. 17: “In view of the uncertainty generated by Moody’s surprising announcement,” Ambac starts to rethink its capital spending plan. Moody’s, meanwhile, puts MBIA’s credit rating under review.

* Jan. 18: MBIA says it is “surprised” by Moody’s move, saying that its capital strengthening regimen “meets or exceeds the requirements previously outlined” by credit-rating agencies, in past months. “We have developed and are implementing a comprehensive capital strengthening plan in good faith reliance on Moody’s stated requirements,” says Gary Dunton, MBIA CEO.

* Jan. 19: Two months of warnings have gone by without action, so Fitch steps in front of the brigade, lowering ratings on Ambac to double-A, after Ambac had scrapped its earlier plan to raise $1 billion in the stock market.

* Jan 22: Mr. Callen, Ambac CEO, says that “we view the current perceptions of Ambac’s business by both the market and ratings agencies as underestimating Ambac’s strengths and future potential.”

* Jan 24: Fitch strikes again, lowering the rating of SCA, another guarantor, to single-A.

* Jan. 31: MBIA reports a fourth-quarter loss of $2.3 billion, but the company sounds a positive note on its conference call. Mr. Dunton says the market “overreacted to the real and obvious problems that we’ve had.” Later in the day, S&P counters this, warning MBIA of a possible downgrade due to capital concerns and projected losses. “The magnitude of projected losses underscores our view that time is of the essence in the completion of capital-raising efforts,” S&P says.

* Feb. 1: Moody’s says it plans on finishing its review by mid-February; says “some bond insurers” are likely to be downgraded.