Pretty much sounds like we're in for a long wait, but that may be the intent to bring other parties to the table, ie debt and preferred holders. Anyone notice the FGIC 4th quarter operating supplement? Looks like some of the smaller commutations RAM mentioned in their release had to be with FGIC sometime during the year. Appears RAM now has less than 2 billion par with them....refer to the FGIC website in the investor section. If I remember correctly RAM had closer to 6 billion par at the end of 2008 with FGIC.
The reason FGIC's portion of the NPO is so small, as well as why it is so concentrated in toxic stuff, is that RAM's allowed for FGIC to recapture its ceded municipal exposure, which FGIC subsequently ceded to MBIA/National.
The reason RAM did this was the NYID arranged a deal where some bad performing FGIC credits were commuted in exchange for RAM consenting to the reinsurance deal.
I think that is one of the reasons why RAM never had an ABS CDO exposure related to FGIC
My estimation is based on Assured Guaranty's publicly released exposure information. For example, look at the remaining subordination for Assured's 1st-lien (non Option-ARM) Alt-A exposure, and the 60+ delinquencies. When one considers that loss severity has been running at 70%+ the reserves are pretty laughable.
I am not sure, also, how RAM accounted for the purchase accounting dealing with the FSAH acquisition. Basically since Assured purchased FSA way below book value, it embedded large losses in its unearned premium reserve. Even with this annoyingly complex cushion, AGO is far from adequately reserved and has aggressive repurchase compliance assumptions.
Additionally,if FGIC is not able to consummate its restructuring (I anticipate that it will be able to do so) it is outrageously under-reserved (and so is RAM, since RAM basically assumes the ceding primaries reserves are reasonable).
This is incorrect. Yes, if 18mos of unpaid dividends occur the Series B holders can nominate two board members -- but that is not a majority and would have little practical effect.
Bottom line is RAM will not pay dividends on any preferred shares until it has repurchased the vast majority of them
At this point in time, it is the majority holders who are buying the common and not the company. So it is to their advantage and not all common shareholders.
They are buying a not too distant $3.00+ for $.70 today.
Given the presumed diminishing float .. it puzzles me why the share price remains in this zone and what caused the two spikes to $.85.
Oh to be a fly on the wall in their offfice and Board room.
Sean, always good to have another good mind at the table. And you tend to look at things thru your own eyes which adds to the input.
Did not view your comments as unnecessarily harsh.
You can view things from insurance aspect and many of us just use common sense. Tynan does things for a reason.
That said, if there were huge unbooked losses ... that critcially impacted the Book or Liquidation value ... then why would they have bought the PMI shares and maybe they were even the ones to buy the BofA shares?
And why would Endo and Gilpin both go if there were significant negotiations with which they are most intimate still in progress?
I agree, things may be much simplier than they seem.
Occam's Razor... had to google that...
Regardless, I am you your camp regading certainty of liqudiation. However, I cannot substantiate your claim of huge unbooked losses to come. Can you provide any detail?
The only indication of this I have is JPM's estimate a couple months ago that Assured has another $400mm (or so) of losses to incur on thier mortgage book based on JPM's individual modeling of each deal. But we do not know how much of this book RAM holds.
This is a constructive dialogue, not an argument. My tone was inappropriate.
I'm just saying that we should base our opinions on the logical outocme of the situation -- EVERYTHING indicates a managed run-off followed by excess capital disbursement is in the cards.
you are really displaying some naivete.
There is no AAA rating for financial guarantors anymore, and RAM will never re-list.
It's Occam's razor: literally EVERY data point reaffirms the thesis of liquidation.
Your per share estimates are also unsubstantiated. RAM has huge unbooked losses, the nature of the game is if FGIC can modify the obligations and reduce losses / RAM uses excess capital to deal with the fact that it is very under-reserved.
There is no such thing as risk free.