MGIC Plunges After Deferring Debt Payment for 10 Years

by 12 Sep 2012

(Bloomberg) -- MGIC Investment Corp. (MTG), the mortgage insurer that breached regulators’ capital limits, plunged after saying it would defer an interest payment on convertible debt for 10 years.

MGIC slid 8.3 percent to $1.60 at 10:30 a.m. in New York and has declined 57 percent this year. The insurer will postpone an interest payment on $389.5 million of 9 percent convertible debt until 2022, Milwaukee-based MGIC said yesterday in a regulatory filing.

MGIC is guarding funds after eight straight losses on costs tied to soured home loans pushed the firm’s ratio of risk relative to capital above limits set by some state regulators. Falling capital levels could impair the firm’s ability to sell new policies that protect lenders when mortgage borrowers default and foreclosures fail to recoup costs.

“They’re doing whatever they can to try to preserve liquidity and capital,” said Rob Haines, an analyst at CreditSights Inc. in New York. “The company is in a very difficult situation right now.”

MGIC’s debt has advanced this year as the housing market has shown signs of improvement. Its $100 million of 5.375 percent senior unsecured bonds due in 2015 have climbed to 74 cents on the dollar from 68 cents at the end of 2011, according to Trace, the bond price reporting system of the Financial Industry Regulatory Authority.


Should CFPB have more supervision over credit agencies?