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Assured Guaranty Ltd. Message Board

  • ipdb2000 ipdb2000 Oct 22, 2009 9:35 PM Flag

    Hebrew Analysis

    The acquisition of FSA may have very well brought in another 250M to 300M (including investment income) in revenue, with a much less proportionate addition of operating expenses. It appears through recent news that operating losses may be quite lower in Q3 as well. They’ve most likely had the opportunity to jump into some nice realized gains on their portfolio in the recent months as well, and I really doubt unrealized losses on credit derivatives have occurred. Another positive to factor is that AGO has written virtually all municipal guaranties last quarter with no competition. They could have demanded damn near any premium they wanted as long is it was still profitable for the municipality to issue it as insured, perhaps even as high as 70% of the spread. Then you have the GAAP adjustments due to the FSA acquisition to take into account. FSA’s 5.7b investment portfolio will be marked to market (adjusted from cost to present market value), FSA’s debt will be written down to market value, acquisition costs will be eliminated, and a 1.3b (magical) increase in AGO and FSA’s unearned premium reserve will be added. The book value of AGO is going to jump like Michael Jordan. The point being, this is not a $19 stock, it’s a $50 stock, and just because the train left the station at $3 a share in March, doesn’t mean it’s too late to get onboard.

    Peace,

    I Pimp Dem Beatchis 2000

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    • Look for a GAAP loss as CDS spreads on AGO have halved so nonperformance risk will hit 'em.

      They are very underreserved and will have to own up to it soon.

    • When you say they "have the GAAP adjustments due to the FSA acquisition to take into account. FSA’s 5.7b investment portfolio will be marked to market (adjusted from cost to present market value), FSA’s debt will be written down to market value..." Have they not done that with the acquisition, or has that not been done yet? If not, when is it taken? Are they on a Jan to Dec fiscal year?

      For an individual holding $150,000+ of their once "exchange-traded debt", I can see a scenario where after the holdings are cheaply marked-to-market, they are miraculously reinstated for at least over-the-counter as Notes at the insistence of AGO for the benefit of its loyal retail investors.

      • 2 Replies to jimpersonett
      • Jim,

        I'm not quite sure I follow your logic. We were FSA's loyal retail investors, not AGO's. AGO assumed the FSA retail debt liability as part of the package it bought from Dexia. The only loyal bond customers they have are the ones that bought AGO's unsecured bonds. If AGO gave a hoot about the FSA's retail bondholders they wouldn't have de-listed the bonds. We were just baggage that came with the deal.

        AGO does have plans for both FSA's retail and institutional bondholders. That plan in my opinion is to buy back all of this debt at a large discount sometime in the future.

      • The acquisition was effective as of the first day of the 3rd quarter, so no financials have been released showing the effects of the acquisition yet. They will be released November 16th, and yes, they are on a fiscal year.

        I don't think the FSA bonds were de-listed in order for them to lose value because they were de-listed after the acquisition date, and the mark to market adjustment would have been made on the date of acquisition. Heck, I don't even know if their market value would have been part of the adjustment anyway.

        I have no idea why they were de-listed. I'm a little ignorant when it comes to corporate bonds and how they work. Anyone else have an explanation?

 
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