Moody's stated that today's rating actions reflect the positive effect that recent settlements of significant commercial real estate (CRE) exposures and ongoing portfolio runoff has had on the group's capital adequacy and liquidity profile. National's improving prospects for generating new insurance within the municipal market was also a positive consideration in the rating actions for National and for MBIA Inc. The rating actions on MBIA Inc., MBIA Corp., MBIA Mexico and MBIA UK concluded reviews for upgrade initiated in February 2014.
RATINGS RATIONALE -- NATIONAL PUBLIC FINANCE GUARANTEE CORPORATION
According to Moody's, the A3 IFS rating of National, stable outlook, reflects the insurer's strong stand-alone capital profile, the meaningful delinking from, and improving conditions of, its weaker affiliates, and its ongoing efforts to re-start insuring US municipal debt in the primary and secondary markets. The rating agency noted that National is currently not writing any material new business and operates in an industry that has not recovered from the financial crisis. National, like its peers, faces significant headwinds from declining fundamentals in the sector, including a dramatic reduction in insurance usage, moderate prospective profitability and still-meaningful legacy risk. Moody's added that National has substantial exposure to below investment grade credits, representing 2.7% of its insured book and 220% of qualified statutory capital, including about $4.1 billion exposure to Puerto Rico credits. Nevertheless, it benefits from the improving financial position of the group which provides greater stability to its credit profile.
RATINGS RATIONALE -- MBIA INSURANCE CORPORATION
The B2 IFS rating, stable outlook, of MBIA Corp. reflects the firm's improved capital adequacy and liquidity profile as a result of recent transactions, including the commutation of approximately $3 billion of CRE exposures, and the settlement of putback claims. MBIA Corp. had only $626 million of remaining exposure to CRE left with reference obligations originally rated Baa, of which, approximately $378 million has some associated statutory loss reserves as of the first quarter 2014. In addition, Moody's expects the company's structured finance book to run off fairly quickly, further reducing potential losses.
MBIA Corp. had $226 million of cash and cash equivalents at March 31 2014 excluding subsidiaries. Moody's expects the company's liquidity to improve as claims decline and premiums are earned over time. In addition, RMBS excess spread recoveries, putback settlements proceeds and likely dividends from MBIA UK in the future would also help enhance the company's liquidity. However, there is still substantial volatility around excess spread collections as a result of uncertainty about residential mortgage prepayments, servicing and rates reset experiences. The company attributed about $826 million salvage value to RMBS excess spread as of 31 March 2014.
Moody's added that the rating of MBIA Corp.'s preferred stock (C hyb) and surplus notes (Ca hyb), stable outlook, reflects their high expected loss content given the company's still weak capital profile and the subordinated nature of these securities.
The B2 IFS rating, stable outlook, of MBIA Mexico, S.A. de C.V. (MBIA Mexico) reflects formal and informal support from MBIA Corp., in the context of the insurer's limited size and standalone financial profile. Its rating is expected to remain closely linked to that of its parent.
RATINGS RATIONALE -- MBIA UK
The Ba2 IFS rating, stable outlook, of MBIA UK reflects the improving insured portfolio, and meaningful stand-alone financial resources relative to its insured risks, moderated by a lack of new business production, and Moody's expectation of pressures from its weaker parent, MBIA Corp., to return capital. MBIA Corp.'s support of MBIA UK, in the form of excess of loss reinsurance and net worth maintenance agreements, is subordinated to insured claims and thus of limited value, in Moody's opinion, due to MBIA Corp.'s weaker credit profile.
RATINGS RATIONALE -- MBIA INC.
The Ba1 senior unsecured debt rating, stable outlook, of MBIA Inc. reflects the improving credit profile of its subsidiaries and its strengthening liquidity profile following the resumption of dividend payments from National and release of funds from tax escrow. However, the firm's high debt burden and meaningful asset risks, a large share of which linger at its wind-down operations, remain a distinct weakness. Moody's narrowed the notching between MBIA Inc.'s senior debt rating and the IFS rating of its lead insurance subsidiary, National, to four from five notches, reflecting the improving financial conditions in the group. However, the notching remains wider than the more typical three notches, reflecting the significantly weaker credit profile of MBIA Corp., its other substantial subsidiary.
It was very clear that the move from 12 to 15 in January was at least partially manipulated. As was the move down. Traders still have a big influence on this stock. my only short term concern is the pressure a sell off could cause on the stock price. by August of this year the stock should be trading higher but we might have some long summer months with no price movement.