well that seems a bit over exaggerated - more of an issue is the amount of dilution that will be needed to pay back the note with an (inevitable) MI default - they might need to issue 100+ shares at ~6$
There is a firewall that keeps the MI division isolated from the rest of the company. As long as the other divisions generate enough profits to pay the dividend, they can pay it. IMO the other divisions will generate more than enough money to pay the dividend.
There seems to be a lot of misunderstanding of what will happen if the MI division goes into bankruptcy. If that happens - I don't think it will - but if it does, and the stock sells off, buy all you can. It's a non-event.
I freely admit that I thought ORI was going to move higher before now. I was wrong. Nonetheless, I still think it will move much, much higher. I have 10,000+ shares. Bought more today.
If they issue debt for equity, I don't think it would be considered dilutive.
The MI division is in de facto receivership now. North Carolina is controlling the assets and runoff. They wouldn't gain anything by going through a bk court.
We should get a lot more clarity on Thursday. The dividend is paid from the other divisions, and Al was talking 10% top line growth there. I assume he meant annually. The economy might not be robust, but it is expanding nonetheless. The MI division will no doubt have ugly numbers again, but the rest of the company should look fairly good.
I don't think they will issue equity at 70% of book, or whatever the valuation is now - would make more sense to cut the dividend.
FNF reported good title results today, would expect ORI also had decent quarter in title. Commercial I am expecting relatively flat, maybe up slightly. Agree there will be some slow growth here - when rates eventually move up there could be a very substantial step up in invest income - but that is prob a 2015 event.
First of all, I don't think they'll have to do either. Like I said, there is no incentive for anyone to force the MI division into bankruptcy. The court would either do what's alreadty happening - or even worse, the creditors could get less or nothing.
Second, I understand your general statement that a new creditor might try to implement restrictions with a loan - which might include a dividend cut. But that assumes ORI would not be in the driver's seat and wouldn't have more than one possible source. I don't believe that's true.
ORI retiredover $300 million in debt already this year. I believe their balance sheet is strengthening. This isn't 2008 where ORI is looking bleak with all the other financial companies, when credit had dried up.
And with their cash flow improving, sans the MI division, I think they'd be able to borrow the money. They could always do it through bonds, and not a bank loan, if the banks were too stingy.
fair enough...i guess one would expect the risk-premium surrounding paying off the note to dissipate if there was an equity for debt swap so on the one hand there would be more shares but on the other they've ridden themselves of the note....