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?
You think finding another LOC issuer and cancelling the existing ones is easy? Of course I will agree that setting a specific target date for something like reporting your over-due financials and then waiving the requirement makes it easy. Did they waive the requirement to pay the lawyers? Will they waive the requirement to pay the cleaning lady (dollardouggie's mother)?
Douggie has iron balls claiming that I was hiding when the price of this POS popped by a couple of percent. Where is he and his cohorts Master B, airline trader, and the others, what with the price tanking Friday? Too bad for them that their pump-and-dump routine comes up against a few people that know something about the company and the industry. Other than recitation of the tangible book value, there has not been one shred of factual data or information from their side to support a buy thesis on this stock.
According to Motley Fool, Kipplingers thinks the SinkHole is a great buy, that investors have over-reacted to the hit to loss reserves and they like, get this, the 17% dividend!!!! Dividend? What dividend? Has the Kippy analyst looked under the covers to see what's moving? He won't like it! And neither will any of the fools that listen to him! What a hoot!
So the SinkHole had a number of specific tasks that had to be completed Friday, lest it be in default of its bank facility agreements, including the LOCs, amended many times. Did management accomplish these tasks? Did management fall short? Is the company in default? Was another waiver letter drawn up, with further onerous requirements laid on the previous ones? We don't know. No announcement, no news release, no 8K filing. How are investors supposed to act on this non-information? One would tend to lean toward the short side, in that, had management achieved the tasks and gotten itself clear of the default conditions, then most likely there would have been a cheerful public announcement by now that all is forgiven and the company can now move forward and upward. However, the silence would suggest otherwise.