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  • girthner21 girthner21 Apr 15, 2010 10:06 PM Flag

    4th quarter and year end

    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.

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    • 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).

    • As an aside, considering it, RAM could also pay 1 month of dividends and then suspend again for 18 months. But I still have no corroboration about the veto thing.

    • Definitely not. This is going to take longer than I think many people here are anticipating.

      Once again, here is what has to happen before common will see any type of shareholder disbursements (buyback OR dividend)

      i) FGIC successfully restructures its obligations

      ii) significantly (2/3+ of current outstanding) reduction in liabilities, both preferred shares and senior notes

      iii) RAM commutes exposure to AGM/AGC at an acceptable price.

      If one is happy with ones position size, i wouldn't watch this on a daily basis. Note that RAM is only going to release operating supplements on an annual basis going forward

    • Where did you get the information that two B preferred holders cannot be vetoed in their decision to not pay dividends?

    • cejr48 Apr 19, 2010 1:36 PM Flag

      And in dec. 2010 when the pref. divs are reinststed and cash is accumulating in the company, and there are no other buy backs that are going to happen, Divs for the common as well?

    • The information is correct. Pursuant to the Certificate of Designation, Preferences and Rights for the Preferred B stock, if RAM Re fails to pay dividends in full for 18 consecutive months, the authorized number of members of the Board of Ram Re automatically increases by two and the holders of the Preferred B are entitled to fill the vacancies by electing two additional directors at a meeting held within sixty days after the last day of the eighteen consecutive month period. These directors cease to serve as Board members upon the payment in full by RAM Re of all accrued dvidends and without further action of the Board.

      Most importantly these two Preferred directors are the only two members who can vote on declaring the dividend (in other words the other five members of the RAM Re board can't veto the declaration). The only limiation would be whether RAM Re can legally declare a dividend under Bermuda law.

      My guess is that the RAM Re Board will declare a dividend no later than December 2010 (which is eighteen months after the last dividend (June 2009) in order to prevent the appointment of any "outside" directors.

    • 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.

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