SinkHole is already under the gun with the BMA because one of its two Bermuda operations has deficient capital and the company has been ordered to do something about that. SinkHole has indicated it is seeking a restructuring of its capital that may be little more than smoke and mirrors and we will see how the BMA responds to that.
Worth $6 in your dreams. If you factor in what this company needs in the way of additional capital and calculate the dilution affect, you get to a book value of about $5 and tangible book of $4. Now add in the probability of additional operating losses and the valuation benchmarks fall even further.
The cancellation of the LOC facility last week takes the pressure off SinkHole's management to produce the third quarter financials. All of the visible pressure had been applied by Barclays as a default condition under the amendments to the facility agreement. Now it will be up to the regulators to demand the financials, but unless there is a specific threat that "certain action will occur unless...." then we will not know what the timetable will be. Clearly, given past performance, the company will leak out the information that some sort of government filing is forthcoming, generating a spike in volume and pps, followed by acute disappointment on the part of buyers in the immediate aftermath.
Not necessarily. Possibly they see more lucrative investments elsewhere within a given time period. Do you know anything about "alternative investments"?
Or, possibly it was somebody short at say, $10, that wanted to cover and to whom 10 cents really did not matter...
Check the balance sheet again. Right above the line marked "Goodwill" ($55.5 million, allocated solely to the personal lines) is a line labeled "Intangible assets" totaling $99.5 million and reflecting a mere $3.8 million writedown in Q2. The big hit in Q2, besides the loss reserves, sharply reduced the goodwill line.
How many screen names are you using, and why?
I was only partially wrong. Read Footnote 9, Goodwill and Intangible Assets, page F32-33 on the revised 10K for 2012 (10-KA). I will grant you the small solace of being correct as to the timing of the annual review -- in Q4 based on 9/30 results. Pour yourself a drink in celebration.
As to your assertion that I am "clearly off base," well, guess again. But first read the footnote. The issue is not limited to personal lines but involves all of the intangibles.
You are irritating and annoying in your unbridled attempts to turn bad news into positives for the stock, at least as annoying as I apparently have been with my on-target analysis of the situation. But at least you offer up fact and data-based arguments to support your side of the equation. To you, I can offer the words "good luck." You will need them. ;-)
Advice (from recent experience yet): Don't get married to your position. And don't think that you can bail out "when it goes up" (I just wrote off a bad pick with a 40% loss, after thinking the market was wrong and the stock would go up and that I could recover some of what I had lost).
Read the latest 10Q disclosure on goodwill and intangible assets. The company considers fair value of these assets to be 101% of book value. Management (and the longs on this board) only wish that the stock was trading at that figure. In fact, this becomes of critical importance because, according to the Q, SinkHole does an annual re-evaluation of its intangible assets as of September 30. One of the elements of such an evaluation is "how does the market value the company's net asset value?" Obviously, at a price per share that is less than half of the company's book value, the market does not think the intangibles are worth anything near 101% of carried value. Guess what this means? Even the longs on this board recognize the implications, having for several weeks now focused on tangible book value (trouble is, they are ignoring the dilutive effects that any recapitalization will have and the depressed returns the TBV will generate and what that means for valuation).
May I suggest you read again the items under "Liquidity and Capital Resources" on page 64? You will see the following"
"As of June 30, 2013, TICNY and the other U.S. Pool companies have negative unassigned surplus, and are therefore prohibited from paying dividends to the Holding Company."
"As of June 30, 2013, CastlePoint Re may not pay dividends without consent of the BMA."
TICNY is Tower Insurance Co. of NY and is SinkHole's largest insurance subsidiary. CastlePoint is one of the two Bermuda operations. The other Bermuda operation is Tower Re which is disclosed elsewhere as being capital deficient under the regulations and, obviously, is precluded from paying a dividend to the holding company. The BMA is the Bermuda Monetary Authority.
Where in the Q do you see the suggestion that "others are o.k."?
On Nov 29 I posted from the 10Q the disclosure that, as of June 30, no dividends may be upstreamed to the holding company without the specific approval of state regulators or the Bermuda Monetary Authority.
I forget which disclosure, probably the footnotes to the Q2 financials, states specifically that the holding company is not permitted to upstream anything out of the subs as of June 30. I had quoted from this disclosure sometime in the past week, noting that if one klills the body (the subs) then the head (the holding company) will die.
A purchase you may regret in the days and weeks ahead. As far as the proposition, I'm afraid I am a bit old for you, considering your own propensity for 12-year-old boys...
To get a complete view of the facility that was cancelled, got to the SEC's website and pull up SinkHole's 8K filed on October 24 of this year. The exhibits 10.1-10.8 comprise the original agreement dated Nov 11, 2011 and all subsequent amendments.
Wrong agreement, cohs. The LOCs that were terminated are those securing two years of underwriting activity at the Lloyd's market in London, and have nothing to do with the $70 million outstanding on the credit facility with bank of America.
When a company underwrites at Lloyd's, it must post an amount of funds to secure its activity, in the event that claims exceed premiums. Lloyd's permits companies to deposit a letter of credit (LOC) to secure those funds. The LOC is issued by a bank, in this case Barclays, and a claimant can draw against the LOC if funds are not otherwise available. The insurance company, SinkHole in this case, must usually maintain a collateral account that reimburses the bank in the event of a drawdown of the LOC. In this case, Barclays was at risk for two years of underwriting activity at $125 million per year, or $250 million total. They wanted off the hook. The problem for SinkHole was to replace the LOCs on deposit at Lloyd's with either LOCs issued by another bank or by funds from other sources, such as the existing investment portfolio (that is supposed to be supporting loss reserves already on the books).
It's eyewash. They borrowed from the left pocket to deposit money with the Loyd's; cancelled the LOCs issued by Barclays; then received from Barclays the cash that they had to put up as collateral (remember what a hoot it was that one of the requirements was that they had to fill out Barclays "Know Your Client" form for the bank acount that SinkHole had to open?) for the LOCs that are now cancelled; which they then transferred back to their left pocket.
What remains for us to guess at is the financial structure of the individual subsidiaries, especially considering that at least one of them is capital deficient, after this movement of funds. Keeping in mind that, for all practical purposes, the same $250 million is covering existing loss reserves and it stands to cover any unexpected losses that might develop in London.
Naturally there is no indication from management if the facility has been replaced or what the ramifications of the cancellation might be. If it was paid off, where did the funds come from? What will the company be doing going forward without this facility? What about the status of the funds at Lloyd's?
Seems to me you got in at $7.65 and then pyramided your losses at $6.75. If you are still in then I can see why you are annoyed, especially after ignoring some of my more informative posts. You got something against the freedom of speech?