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MBIA Inc. Message Board

  • wedbush80 wedbush80 Aug 22, 2013 2:11 PM Flag

    ? on the $2.8 billion in operating loss carryforwards

    In the 2nd qtr conf call, Edw. Chaplin referenced the deferred tax asset associated with net operating loss carryforwards. It's a huge number, larger than the current market cap of MBI. Do you know if the company can monetize this, either partially or in total, through operations? Does it require normal operating earnings to capture the benefits or can the gains stem from asset sales or from other non-operating transactions? If MBIA were sold or merged would the acquiring company have the benefit of these going forward?

    Another question for you MBA grads: MBI began reaquiring debt in the 2nd quarter and into the 3rd. Here's a line from that part of the conf: "Over time, we're expecting to reduce both the cost and the amounts of our financial leverage as well including by reverse inquiry repurchases." What does Chaplin mean by reverse inquiry repurchases?


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    • Net operating loss carryforward (NOL) can/will be preserved in an M&A situation. There is lots of value to it. I would roughly equate it to 70% of 2.8bb. As the company pays 30% tax on income. So for the next $2.8bb in income, they would not pay any income tax. That is a lot of value. I actually expect them to have more NOL as they settle with ResCAP, JPM and Credit suisse.

      This NOL is attributable to MBIA Corp. We all know that the muni side National is better rated and more valueable. We also know that MBI selling at a discount to National valutation. IMO, this company is ridiculously cheap.

      regarding reverse inquiry, basically they are asking all current bondholders if they want to sell it to the company(MBI).

    • What this means to my understanding is that MBI will actively seek out current bond holders and ask them to if they would like to sell the bonds back to the company....probably in exchange for a brand new capital structure that the tutes would benefit from with warrants....convertible debentures etc. You can bet there are a lot of tutes that would like to see the company simply the leverage and capital structure and start to write new business again.

      Sentiment: Strong Buy

    • Mark Palmer from BTIG pointed out tax loss. That they will not pay taxes except for alternative minimum taxes on the next $2.8 billion.

      The second part is probably buying back securities.

      Sentiment: Buy

      • 1 Reply to surfacetensionne
      • Doesn't the fact that the alternative minimum tax (ATM) calculation require that you ADD BACK into income all operating losses completely negate the $2.8 billion loss carry-forward?

        In Canada, you pay the greater of the two: the tax calculated the regular way, or the tax calculated using the ATM calculation. The only benefit is that the difference between the two is the ATM carry-forward, and can be used against taxes payable in any year when you are NOT subject to the ATM.

        E.g.: tax payable $10. ATM payable $12. Difference $2. ATM carry-forward $2.

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