Recent actions by ratings agencies on financial companies in the news:
Morgan Stanley (NYSE: MS)
Moody’s reviews A1 Morgan Stanley for downgrade; Prime-1 affirmed (Oct 10)
Goldman Sachs (NYSE: GS)
Moody’s affirms Goldman Sachs’ Aa3 long-term ratings and changes outlook to negative (Oct 9)
Iceland
Moody’s: Iceland - Downgrade Reflects Dislocations from Global Banking Crisis Oct 9)
S&P: Glitnir Bank Rating Lowered To ‘D’ On Receivership (Oct 9
Moody’s downgrades Glitnir’s covered bonds to Ba3 direction uncertain (Oct 9)
Moody’s downgrades Kaupthing to Caa1/NP/E from Baa3/P-3/D+ (Oct 9)
S&P: Icelandic Insurer Tryggingamidstödin Group Ratings Downgraded And Kept On Watch Neg (Oct 9)
Previous Ratings Roundup.
Technorati Tags: (MS), banking, credit-crisis, credit-ratings, credit-risk, Glitnir, Goldman-Sachs, GS, iceland, morgan-stanley, research-roundup
Yahoo’s’ solid first quarter results were not good enough to fend off Microsoft’s hostile takeover bid, but may deliver a better deal for shareholders.
Henry Blodget at Silicon Alley Insider says Yahoo (NASDAQ: YHOO), “has done what it needed to do: report a solid quarter in the high end of the range.”
The results were not a blow-out and certainly could have been higher. However, they should be enough to allow Yahoo to maintain its current Microsoft stance: no deal unless you raise price. Yahoo has not decided whether to pursue Google outsourcing deal, but clearly still on table.
All Things Digital’s John Paczkowski says the results are “a nice story on the face of things–one certain to give Yahoo CEO Jerry Yang and Co. the material they need to blather out more justifications for continued independence. But it doesn’t exactly prove Yahoo’s significantly accelerating its revenue growth as the company claimed in a recent investor presentation.”
So the truth of the matter is this: Yahoo continues to struggle with profitability, and though the company’s strategy and investments are perhaps beginning to pay off, as Yang said during a conference call today, they’re clearly not paying off enough to thwart Microsoft’s takeover bid.
All Things D’s Kara Swisher says that now the Yahoo-Microsoft takeover soap opera moves to a true ground battle.
But unless Microsoft steps up and pays more right now, this is not going to end quickly, and will be more a Sisyphean slog than anything else.
Swisher says sources close to Microsoft said it is likely the company hopes to make some sort of move–starting truly significant negotiations with Yahoo, perhaps–before CEO Steve Ballmer’s self imposed deadline of thsi Saturday. “Nonetheless, several added, it will probably not include raising the price of its unsolicited bid for the troubled Internet portal quite yet.”
But PaidContent says market reaction indicates Microsoft’s bid will not be raised.
Despite a modest “beat and raise”, the initial Microsoft offer still looks more like a ceiling than a floor.
Analysts from Bernstein, Citi, RBC and UBS, quoted by PaidContent indicate the results may be enough to squeeze a slightly higher offer, but not enough to fend off Microsoft.
Lex in the Financial Times says “it is difficult, however, to imagine Steve Ballmer, Microsoft’s chief executive, feeling compelled to up the price significantly on the back of these numbers. The discount at which Yahoo’s stock trades relative to the offer actually widened slightly in after-market trading last night.”
Yahoo’s shareholders may be feeling disappointed. But they can comfort themselves with one thought. At least the company’s decent results ought to make Mr Ballmer think twice about making good on his recent threat to actually cut his bid.
Ballmer today vowed not to increase the offer, saying Microsoft (NASDAQ: MSFT) could walk away from the deal, Bloomberg reports.
We are offering a lot of money. If Yahoo’s shareholders like it, that’s great. We are prepared to go forward without a merger. - Steve Ballmer, Microsoft
Thomson StreetEvents provides details of the Yahoo conference call and Charlie Rose tries to make sense of it all by interviewing himself.
Technorati Tags: Microsoft, research-roundup, Yahoo
Last week, Google (NASD:GOOG) shares suffered a precipitous drop after comScore released a report showing that paid click growth for February had slowed to 3% over the same period last year. This followed a weak January, when clicks dropped 8% from the December holiday shopping period.
The reports have raised concerns about Google’s Q1 forecast and, more generally, whether online advertising would be dragged down by the weak U.S. economy. Comparing the 3% gain to the 30-40% gains Google had seen in 2007, Bernstein Research analyst Jeffrey Lindsay said
We think that these higher earlier growth rates reflected Google’s large search share gains over Yahoo! and Microsoft at that time and also paid search’s gains over display advertising – two sources of incremental growth that are now maturing. Now we believe the primary driver of Google’s paid click growth is the fundamental shift of offline advertising to online.
Overall, Lindsay remains bullish on the stock, noting that Google’s key metrics all improved for the month, with click-through rates and paid click per search with paid ads each improved.
Google has explained the drops by pointing to the reduction in what is known as coverage ratio – the number of ads displayed with each search. In recent months, Google has implemented a series of changes to combat what it refers to as low quality ads. Google has added a quality score which is used to determine whether an ad is displayed, along with its position on the page. While this may have the short-term effect of reducing the coverage ratio, Google believes that it will result in higher click-through rates, thereby increasing the value of keywords. Yet response on the Street and in the markets suggest concern over the time it may take for the benefits of the improved quality to offset the reductions in click-throughs.
Following a Friday conference call with comScore and ChannelAdvisor, Citi Investment Research analyst Mark Mahaney cut his estimates for Google, while maintaining a buy rating and a $590 price target. His 2008 revenue estimate dropped from $16.0 billion to $15.6 billion, while his earnings forecast was cut to $19.08 per share from $20. Those numbers were based upon 2008 forecasted paid click growth of 16% year-over-year and 0% Q1 growth quarter-over-quarter. According to Citi’s model, every 1% change in quarter-over-quarter paid click growth translates into a $35-million swing in net income.
Meanwhile, BMO Capital Markets analyst Lee Westerfield suggests the real concern in the comScore numbers was the modest growth in queries. “The new concerning datapoint for Google in February is the sharply slower growth for Google in Queries (+29%), raising the level of concern that Google search hyper-growth and momentum is at last maturing.”
Piper Jaffray analyst Gene Munster remains bullish on GOOG with a price target of $790. Pointing out that his checks with search engine marketers have not revealed any weakness in paid ads, he notes “The second month of comScore gives us further evidence that Google will fall short in the March quarter. However, we believe the magnitude of the shortfall will not be as bad as the comScore data is suggesting.”
Yet American Technology Research analyst Rob Sanderson (courtesy Silicon Alley Insider) thinks that many are getting the Google picture wrong.
While most analysts and investors agree that quality improvements will bring along price improvements, there is concern about magnitude and timing. We believe that higher prices will completely offset lower volumes and that the timing will be immediate.
Sanderson points out that the focus should be on ecommerce conversion rates, not on the specific numbers of click-throughs. Advertisers pay for transactions, not for clicks. Improved quality should immediately lead to advertiser willingness to pay more for the higher-quality clicks:
We believe this move will be close to immediate . There are two reasons why we make this claim: 1) GOOG is an efficient marketplace – there are hundreds of thousands of advertisers that bid on Google keywords and 2) improvements in conversion rates and ROI are measureable – this is the mantra of GOOG. We also believe that GOOG management knows what they are doing and would not intentionally slow revenue growth.
Sanderson, who rates GOOG a buy with a $750 target price, sees the current dip as a strong buying opportunity.
Technorati Tags: (GOOG), Comscore, Google, internet, internet-advertising, online-advertising, research-roundup
Today’s Wall Street Journal story examining China’s role in pushing up global coal prices raises the question of whether this is a short-term blip or a long-term trend.
China has long been a huge supplier of coal to itself and the rest of the world. But in the first half of last year, it imported more than it exported for the first time, setting off a near-doubling of most coal prices around the world, the WSJ reports. “The capper came in late January when a winter of punishing snowstorms and power shortages led Beijing to suspend coal exports for at least two months.”
Some experts say coal prices could remain high or even keep climbing through 2009 or beyond, weighing on the already-slowing world economy.
Even though coal is a leading source of atmosphere-warming greenhouse gases, its share of the world’s energy diet is increasing — which could help keep its price up in a recession, the WSJ says. “Although the use of cleaner-burning alternative fuels is on the rise, fast-growing energy consumption is expected to underpin coal demand. Still a relatively cheap — and abundant — alternative to oil, coal is sought in rapidly industrializing nations such as Brazil, India and Vietnam as well as China.”
Standard & Poors recently identified coal as one of the top ten issues facing electric utilities in the US – but not from the point of view of market prices. “It’s likely that the new administration in Washington will try to make its mark on greenhouse gas sometime in 2009; until then federal action seems remote, although campaign rhetoric will be heated. Framing the 2009 dialogue will be energy independence, national security, and carbon-based fuels, such as coal and oil. Future legislation that crimps coal use and affects credit quality for electric utilities is possible, but not certain at the moment, given past stalemates on energy policy issues.”
Funding for reducing greenhouse gas emission will affect credit quality for coal plant operators.
IBISWorld also says environmental concerns will have an impact on the US coal industry. “Attempts by electricity generators to control their greenhouse gas emissions in response to rising public concern would almost certainly take the form of switching to lower carbon sources of fuel, adversely affecting the demand for coal. Continued investment in cleaner coal technology, by both the private sector and the government, offer only limited scope for reducing greenhouse emissions, “IBISWorld says in Coal Mining in the US.
“After increasing markedly in the mid 2000s, coal prices are expected to stabilize and then drift lower over the outlook period to 2011, partly in response to higher production levels. Sought-after low sulfur coals will continue to attract a premium price. Overall, industry performance is expected to decline over the outlook period as generally weaker prices offset increases in output. ”
Real industry revenue is expected to fall at an average annual rate of 4.5% over the five years ending in 2012.
In its Coal Outlook for 2008, Fitch Ratings notes coal producers are benefiting from improved domestic consumption after a weak period, greater exports and declining production in high cost basins. “Regulatory uncertainty about carbon emissions, however, has stalled plans for many new coal plant builds, which will cap domestic demand in the medium term. Margin expansion will be difficult given that cost inflation is not expected to be offset by productivity gains.” However:
Growth in export demand may underpin higher pricing and should help producers manage production volumes efficiently to lower unit costs.
CreditSights admits its thesis of increasing supplies coming to market and lowering prices “has proved dead wrong in the near-term owing to numerous global supply constraints.” But
While our thesis certainly didn’t incorporate these short-term factors, we still maintain that over the long-term coal is not a supply constrained commodity and producers will not be able to maintain sustainable pricing power at these levels.
CreditSights says “we remain underweight coal producer bonds as a whole.”
Technorati Tags: coal, electricity, research-roundup, utilities
Reaction to Yahoo!’s rejection of Microsoft’s $31-a-share offer has been swift and mostly savage.
Saying You blew it, Yahoo!, The Motley Fool sees the move as “the end of Yahoo! as we know it.”
Microsoft’s extended hand was cold and clammy, but at least it was an exit strategy.
“Yahoo! may think the bid was too low, that Microsoft will bid higher, or that Google will save the day, but it’s naive on the first two counts and nearsighted on the last one,” TMF’s Rick Aristotle Munarriz writes.
Paul Kedrosky of Infectious Greed still expects a sweetened counter-offer from Microsoft, “but I just don’t see how thing doesn’t head speedily to a combined company conclusion.”
Henry Blodget writes on Silicon Alley Insider: “Sorry, But $31 Does Not “Massively Undervalue” Yahoo… And not only because no one else is willing to step up and pay even $31.
Because even Yahoo’s expert advisors can’t come up with compelling logic to support the idea.
He quotes RBC’s Jordan Rohan as valuing Yahoo! at around $24 a share.
“Jordan, by the way, thinks that the stock’s going higher because Microsoft will raise its bid–but not because Yahoo is “massively undervalued.”
Blodget also refers to today’s New York Post, which quotes Microsoft sources dismissing Yah00’s $40 counteroffer as “absurdly high,” but also allowing that Steve Ballmer is willing to go higher than the $31 that is already on the table.
Based on Yahoo’s $40 counter and Microsoft’s previous willingness to pay $35, both sides appear to be converging on a sale price of $35-$36.
Today’s New York Times says Microsoft’s statement suggests that, “at least for now, the company is not willing to raise its price.” Microsoft also indicated anew that it was ready for a fight, repeating earlier statements that it might consider “all necessary steps” to ensure the deal is completed.
According to 24/7 Wall Street’s Doug McIntyre “No one will pay twice what Yahoo! traded for last month. If the management could have gotten the shares above even $30 for a period of time, they would have. All they have proved is that it can’t be done.”
Canaccord/Adams “believes that Microsoft will likely be successful in its bid for Yahoo, but at a higher purchase price than the $31.00 offer that the Yahoo! board rejected.
Microsoft would in our view be willing to pay close to $40.00 per share in order to consummate the transaction on friendly terms with Yahoo.
Canaccord today reaffirmed its Buy rating on Yahoo! with a price target of $35.
Prior to Yahoo!’s rejection of the Microsoft offer ThinkEquity Partners urged Yahoo! to accept the deal, noting that spurning the offer could accelerate the already rapid pace of key employee departures:
Memo to Yahoo! management—Do not look back.
Think Equity said it was “raising our price target on YHOO shares from $25 to $31 and lowering our rating from Buy to Accumulate.”
Citigroup last week raised its Price Target to $31 from $22 to reflect MSFT’s $31 per share bid, “which we believe has a reasonable possibility of being the final outcome.”
And Merrill Lynch advised Yahoo to Beware of Competitors offering deals:
We think it would be wise for Yahoo! to use this potential partnership offer as leverage for a higher offer from Microsoft.
Likewise, Bear Stearns believes the offer could be increased:
This was an unsolicited first bid; final consideration could be higher. While there could be other bidders, in some recent M&A transactions, the original bidder has come back and bid more because of the strategic value.
Legg Mason stock guru Bill Miller thinks the “deal is a strategic imperative for MSFT, and that YHOO is in a tough spot if it wishes to remain independent.” The firm values YHOO in the $40 range and thinks MSFT will need to enhance its offer if it wants to complete a deal. Miller’s comment’s carry extra weight: with almost 9% of the stock, Legg Mason is Yahoo’s second-largest institutional shareholder, behind Capital Research.
YHOO is a uniquely valuable asset, and we expect MSFT will do what it takes to acquire it.
The full text of Yahoo’s letter of rejection is available here, and Microsoft’s response to the rejection can be found here.
Technorati Tags: (GOOG), (YHOO), Google, internet, Microsoft, MSFT, research-roundup, Yahoo
The likelihood of credit ratings downgrades of the major monoline bond insurers continues to increase as writedowns mount and sources of capital dry up.
“As the rating agencies have continued to move the AAA capital requirements higher and higher, the markets have taken a more bearish stance towards the sector which, in turn, has effectively cut the sector off from the debt and equity markets where they were planning to raise much of that capital, ” CreditSights notes in Monoline Monitor: Crossing the Credit Rubicon.
As it stands now, barring a regulatory sponsored bank funded bailout, the sector is facing the near-term prospect of multiple downgrades.
In CreditSights’ opinion, “the bailout option being pushed by NY State Insurance Superintendent Dinallo is simply coming too late to the game…we continue to believe the monoline problem will ultimately require a broader multi-faceted regulatory response.”
Adding more fuel to the fire, Pershing Square Capital’s Bill Ackman now estimates potential losses by MBIA at $12.6 billion and Ambac at $11.6 billion. A longtime critic and short-seller, Ackman is backing his claim that the companies could soon be insolvent with a massive “OpenSource” model comprised of hundreds of spreadsheets detailing the monolines’ holdings at risk. Ackman has sent the model to regulators and others, accompanied by a letter.
The Open Source Model estimates that probable losses on the entire universe of 534 ABS CDOs issued between 2005-2007 will be approximately $231 billion, with super senior tranches accounting for approximately $92 billion of this total.
Ackman’s letter and model is available here.
Overnight MBIA posted its biggest-ever quarterly loss of $2.3 billion, and may raise more capital to offset a slump in the value of subprime-mortgage securities, Bloomberg reports in a comprehensive rundown of recent developments.
Oxford Analytica concurs that bond insurers are likely to face more ratings reviews and downgrades as efforts to raise capital fall short. “While bailout efforts are welcome, regulators have few levers to encourage participation by banks. Even if recapitalisation succeeds, monolines have seen a huge drop in confidence from investors — which will take time to restore and could imply serious problems for the future monoline business model. ”
Given the size of banks’ total insured bond portfolios, analysts have estimated downgrades could result in 200 billion dollars in total bond losses and bank writedowns, OxAn says in Monoline downgrades put system at risk.
Much of this exposure may be concentrated: Citigroup, UBS, and Merrill Lynch’s losses could total 70 billion dollars if bond insurers lost their top credit rating, according to Oppenheimer & Co.
Technorati Tags: AMBAC, Ambac-Assurance, MBIA, monoline-insurers, research-roundup
Today’s Commerce Department report that the US economy virtually ground to a halt in the fourth quarter only increases the likelihood of an “official recession” this year. Gross domestic product growth slowed to a meager 0.6% from almost 5% the previous quarter, and was below expectations.
The International Monetary Fund has cut its estimated for US growth from the fourth quarter of 2007 to fourth quarter 2008 to 0.8%, down from 2.6% in 2006-2007, raising the likelihood of GDP dipping into negative territory for at least part of this year.
In its latest World Economic Outlook Update, the IMF says the overall balance of risks to the global growth outlook is still tilted to the downside.
“The main risk to the outlook for global growth is that the ongoing turmoil in financial markets would further reduce domestic demand in the advanced economies and create more significant spillovers into emerging market and developing economies. Growth in emerging market economies that are heavily dependent on capital inflows could be particularly affected, while the strong momentum of domestic demand in some emerging market economies provides upside potential,” the report says.
In a separate Global Financial Stability Report Market Update, the IMF said that deteriorating economic conditions could exacerbate pressures on major financial institutions that have already suffered big losses from the subprime crisis.
A possibly deeper economic downturn in the United States or elsewhere could also serve to widen the crisis beyond the subprime sector, as credit deteriorates more broadly.
Already delinquency rates in 2007 vintages of U.S. prime mortgages (those to the most credit worthy borrowers) are rising faster than in previous years, albeit from low levels, and other forms of consumer credit show signs of deterioration.
The CFOs of American companies seem to be expecting a recession. Their economic confidence plunged more than 10% since last quarter, moving to 19% below where it stood at this time last year, according to a recent survey conducted by Financial Executives International (FEI) and Baruch College’s Zicklin School of Business.
In the 2007 fourth quarter “CFO Outlook Survey” the CFO Optimism Index for the US economy was 56.26, dropping significantly to fall even further past last quarter’s three-year low of 62.85.
This quarter, nearly 100 percent of the CFOs are as concerned, or more, about recession than last quarter, while over 95 percent report being as concerned, or more, about inflation than they were last quarter.
Meanwhile, RGE Monitor has an interesting take on the topic. A recession is usually defined as two consecutive quarters of negative growth. In RGE’s view, “A different meaning is attached to the concept of global recession, in a world where China, Russia and India account for half of global growth and are growing at an annual rate of 11.2%, 7% and 8.5% respectively.”
A 2.5% rate of global growth qualifies as a global recession.
Technorati Tags: economic-data, recession, research-roundup, subprime-mortgage
When the topic of sovereign wealth funds comes up in a Presidential candidate debate, it is time to take notice.
Even the question by NBC’s Brian Williams – suggesting that SWF investments in the likes of Citigroup and Merrill Lynch strike the American public as “just plain wrong” reveals how the topic has become a hot potato.
Reuters reports that business and political leaders will be queuing up to talk to sovereign wealth investors at the World Economic Forum in Davos “as debate rages over whether these cash-rich funds are the saviours of global finance or a threat to economic stability.”
In a briefing, The Economist provides a good rundown of the issues. In keeping with its free-trade, free-market philosophy, the magazine warns against financial protectionism.
A broad, politicised hostility to foreign direct investment would come at a high cost. Such investment spreads financial capital, know-how and technology. It helps the world economy adjust to imbalances and gives countries stakes in each other’s prosperity.
Writing for New York Times Dealbook, Andrew Ross Sorkin sounds a more cautionary note. He quotes legendary financier Felix Rohatyn as saying what the SWFs really want is influence on the world stage, despite their insistence otherwise.
He’s right, argues Sorkin:
While government-controlled funds swear up and down that their investments are purely financially motivated, they just can’t be.
Commenting on why value investors such as Warren Buffet are not snapping up weakened US banks, Rohatyn says: “The big difference is the political element. Buffett is seeking the best return when he invests; that’s his only goal. For Dubai and China, whether the investment returns 10 percent or 20 percent - or perhaps much less - is almost beside the point.”
“They are making investments that they probably think are O.K. but not spectacular,” Rohatyn said of government-controlled funds. For them, he contends, “there has to be a political objective over and above the rate of return.
This is not a rallying cry for the United States to put up a protectionist fire wall around itself, Sorkin writes. “That’s not the right answer. But we do need to at least recognize what these investments mean for the future. ”
One influential adviser has added his voice to calls for more oversight. Mervyn Davies, chairman of Standard Chartered bank and a leading business adviser to Gordon Brown, the UK prime minister, said SWFs based in the Middle East and Asia should agree to adopt minimum standards on transparency and governance.
“Because sovereign wealth funds have become such important players, they have to behave impeccably,” he told the Financial Times. “Otherwise they’re irresponsible participants in the world economy.”
Davies’ comments are significant because Temasek, the Singapore-based investor that is one of the world’s largest sovereign investors, has an 18% stake in StanChart.
One useful resource in tracking SWF developments is Excessliquidity.org, a generally “pro-SWF” blog. At a basic level, the US Treasury provides a clear yet thorough description of SWFs and how they work.
A consensus seems to emerging that, at a minimum, increased transparency and disclosure is required. The question becomes how this can be enforced. A previous Research Recap post, Sovereign Wealth Funds Emerging as Major Force, addressed this and other aspects.
Brad Setser‘s blog on RGE Monitor notes that SWF’s have become part of the cultural zeitgeist as evidenced by Maureen Dowd’s column in the New York Times skewering the Gulf’s purchases of US banks. A broader New York Times story looks at foreign acquisitions of US companies, including by SWFs.
Setser notes that the Times story says that a lot of the 2007 inflows came from Europe and Canada, not Asia or the Gulf.
“For the first time since 2000, foreign acquisitions will top US acquisitions abroad, generating around $100b in net inflows. That is not enough to finance a $750b deficit, but every little bit helps.”
Technorati Tags: research-roundup, SWF
The focus of the 2008 Presidential nomination races has shifted dramatically, causing a scramble among the candidates to make their cases for whose policies are best able to revive the flagging US economy.
The New York Times recently provided a good rundown of the candidates’ views on a variety of economic issues, and has an interactive graphic listing their positions. Today the Times has an indepth interview with Hillary Clinton on her economic policies
Reuters offers a useful “Factbox” that tracks recent statements by the candidates on economic issues.
The anti-tax advocacy group Americans for Tax Reform has issued a scoresheet ranking the candidates according to their commitments to lower, simpler taxes. On the Republican side, Rudy Giuliani receives the most check marks, followed by Mitt Romney, Mike Huckabee, Fred Thompson and John McCain. Perhaps not surprisingly, Clinton, Edwards and Obama do not receive a single check mark.
The more liberal-leaning Brookings Institution argues that tax cuts would be ineffective or counterproductive, according to a recently published Primer on Fiscal Stimulus from the think tank’s Hamilton project group. The paper advocates temporary measures such as extending unemployment insurance benefits, increasing food stamps and issuing flat, refundable tax credits as the most effective policy options.
Click the links below to see the candidates’ official economic policy platforms:
Hillary Clinton
Barack Obama
Mike Huckabee
John McCain
Ron Paul
Mitt Romney
Technorati Tags: clinton, economy, edwards, giuliani, huckabee, mccain, obama, paul, political-strategy, presidential-candidates, research-roundup, romney, stimulus, Thomson
The continuing subprime-related writedowns by major financial institions have largely come as no great surprise, but Merrill’s Lynch’s announcement that it has written down to zero a $2 billion trade with monoline insurer ACA clearly spooked the markets.
Research Recap raised a red flag in December, highlighting an Alphaville report that S&P’s downgrade of ACA was going to have “a serious impact.”
Today Lex notes in the Financial Times that more trouble lies ahead for the monoline insurers, including MBIA and Ambac, both of which have already taken a major market beating, reflecting fears they may lose their AAA rating.
“Merrill acknowledged that by writing down, to the tune of 16%, the $4.1 billion of hedging gains from trades with triple-A monolines,” Lex writes. “That raises the prospect of a second leg of big charges for Merrill if the monoline situation worsens further.” Other banks will a also have to reflect the gathering over the bond insurers, when positions are next marked to market, according to Lex.
In a recent report on brokers, Wachovia Capital Markets quoted Bear Stearns as saying its monoline exposure is limited to positions in credit trading and to some extent its municipal inventory. “CFO Sam Molinaro mentioned that the ACA equity exposure to the firm is immaterial and that BSC has fully reserved for any ACA counterparty credit exposures.”
William Blair & Co last week reiterated its Market Perform rating on MBIA, noting that the company’s “exhaustive $2.5 billion Capital Management Plan should keep Rating Agencies quiet for now.” And Rapid Ratings raised its rating to a Speculative Buy, acknowledging that the company’s credit risk was High and the ratings 0utlook Negative.
Fox-Pitt Kelton remains bullish on the industry:”We believe that the remaining required capital will be achieved with a combination of reinsurance and issuance of securities (or soft capital facilities). ” In a Jan 8 report, the firm continued to rate MBIA as Outperform.
In the opinion of CreditSights, “the ability of Ambac to survive as a going concern is now in material jeopardy.”
“Barring a significant equity injection by an outside investor or the outright sale of the company to a highly rated buyer it is beginning to seem that a downgrade is inevitable.”
Technorati Tags: (BSC), (MER), aca, Ambac-Assurance, Bear-Stearns, MBIA, merrill-lynch, monoline-insurers, research-roundup
