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I agree totally...what i was trying to look at was worse case. Also not sure if they might try to retire some of the surplus notes early if they are in the position to do so
In the earnings press release it says specifically the $400 is not in the Dec/13 statements ....
but all of this is really just guess work on all our parts. For Example....
I have not taken the surplus notes that were issued back in 2009 into account. They are treated as debt with a par value of $700 million. $144 million was suppose to have been paid back in 2011 but the insurance regulatory said no. The other $556 million is due in 2024.
The $144 million is being carried on the F/S at full value so the shareholders surplus already reflects it. However, the $556 is only being carried at $148 million (due to mark to market accounting of liabilities). Therefore, over time shareholder surplus will be reduced be roughly $300 million as the market value of the $556million surplus note moves up to its Par value of $556 Million.
So my earlier estimated BV of $600 for SHL's shareholder surplus should probably be cut in half to $300 million or $4.75 BVPS
Simple Valuation......
A very simple look at what Syncora Holdings ltd might be worth.
Lets use 2011 Net Income for SHL of $ 244 Million as a conservative example of how much they might be able to make going forward. I selected 2011 because it was a year that did not have any big write-downs and did not have any large court settlements.
There are about 64 million shares outstanding so the EPS for 2011 was $3.8.
So currently at a $2 price Syncora is trading at a P/E ratio of 0.5. If we look at AGO, MBI, and AMBC they currently have P/E ratios of 8.5, 3.4 and 1.4, respectively.
So obviously Syncora’s current P/E of 0.5 is way to low. So even if the P/E gets up to the AMBC level of 1.4 the price should climb to around $5 and up to almost $13 if Syncora can reach MBI’s P/E level.
Now this is a very simple look and could only happen if they get permission to write new business …which I believe they will get by the end of the second quarter….and their credit rating is increased which should also happen in the same time frame.
discussion is always good...
But remember BV needs to be calculated based on the shareholder Surplus as reported in the consolidated statements of the publicly traded company SHL not from the policyholder surplus of the regulated insurance company. As of december 31, 2012 that number was -$63 million my estimates is that after everything is factored in the shareholder surplus will be +$600 million by end of Q1/14.
therefore BVPS will be around $9 per share
What will be interesting is seeing how quickly they come out with the consolidated financial statements for the holding company. In the past those statements have come out mid-year because there was not requirement to file them with the SEC on time.
There is no reason why they could not get the SHL statements out by the end of March. Also they will not be able to get re-listed on the big board without current audited F/S.
My guess they will either fill audited year-end F/S for the holding company ASAP so they can get re-listed right away or they will wait to file year-end and Q1 statements for the holding company in April/May and then apply for re-listing. By then they should also have a ruling by the NYID as to writing new business
But the big question is .......
What is the "Total Syncora Holdings Ltd. common shareholders’ deficit/surplus as of end of 2013 and end of Q1
As of the Dec 31/12 F/S for Syncora Holdings show that the common shareholders’ deficit was ($763) million as of Dec 31/11 and by Dec 31/12 it had dropped to only ($63).
During 2012 SGI had net income of just over $300 million and this year SGI net income was $391 million.
If you add in the $400 extra from JPM then net income would have been almost $800 million.
so my guess is that Syncora Holdings Ltd. common shareholders’ deficit/surplus as of end of 2013 should be no less than $600 million or roughly $9.75 per share
By the end of Q1, 2014 surplus should be $1.4 Billion
As of Dec 31, 2011 Surplus was $186 million by
Dec 31, 2012 Surplus was $510 million by
Dec 31, 2013 Surplus was $973 million
You think the stock price reflects this....I don't
This means that they now have a much better understanding of how much if any they will be able to recover from some of the JPM claims they have already paid. The nice thing about this is that the number has already been included in the F/S but the $400 million from JPM has not.
Therefore next quarter if all else is held constant then Surplus will go up by $400 million in cash they will get with no negative offset by having to increase reserve losses because if they needed to increase reserve lossess they have already done that in the Dec 31, 2014 Financials. Hope that helps
surplus is $973 +$400. The $400 million from JPM was not included in the Dec 31, 2013 financials.
as my kids would say just 2 more sleeps till Friday lol
In the past the right way to play this stock was to sell the day of or after any big news because the main issues facing the company.....ie ...going concern, liquidity mismatch and ban on new business were still outstanding. However, two of these issues have been addressed and put to bed and the ability to write new business will be settled in the next month or two since the company's surplus will be significantly above the required regulator levels and the going concern and liquidity issues are gone.
selling - Cannot understand why anyone would be selling at this level unless they are trying to short the stock which will eventually be very costly for them. Current levels do not reflect any logical valuation. The main issues with this company have been removed or will be removed shortly. It no longer has to put in the going concern line in their financials and the liquidity mismatch issue is over.
The NY Insurance Dept will remove their ban on new business and their rating will be moved up. So don't give up your stocks at these low levels.
Might you have the entire post to cut and paste into here because i cannot get into it directly
Thanks
Simple Valuation......
A very simple look at what Syncora might be worth.
Lets use 2011 Net Income of $ 244 Million as a conservative example of how much they might be able to make going forward. I selected 2011 because it was a year that did not have any big write-downs and did not have any large court settlements.
There are about 64 million shares outstanding so the EPS for 2011 was $3.8.
So currently at a $1.48 price Syncora is trading at a P/E ratio of 0.39. If we look at AGO, MBI, and AMBC they currently have P/E ratios of 8.5, 3.4 and 1.4, respectively.
So obviously Syncora’s current P/E of 0.39 is way to low. So even if the P/E gets up to the AMBC level of 1.4 the price should climb to around $5 and up to almost $13 if Syncora can reach MBI’s P/E level.
Now this is a very simple look and could only happen if they get permission to write new business …which I believe they will get by the end of the second quarter….and their credit rating is increased which should also happen in the same time frame.
I can understand why there was a lot of buying today….but I cannot understand why people were willing to sell at this level.
New Business - The timing of the deal with JPM and the remediation of its exposure to several material financial guarantee insurance policies is perfect.
Both will be reflected in year-end financial statements and year-end statutory statements.
This should allow the NY Insurance Dept to lift the ban on writing new business.
Will also be very interesting to see how the credit rating agencies react to this news.
This truly is great news. Although we do not know the dollar value of the JPM deal the remediation of the exposure to several material financial guarantee insurance policies is key and I think shows just how hard management has been working to turn this company around.
Consolidated Statements were signed by the auditors on June 11, 2013 and therefor include reference to Jefferson County but do not reflect the financial impact of Jefferson county since the actual deal has not yet been approved by the courts.
Great news is the the total shareholder deficit dropped from $764 million to $63 million and that does not yet reflect the Jefferson county deal
The Company entered into a plan support agreement (“PSA”), dated as of June 6, 2013, with Jefferson County and other bond insurers that insure Jefferson County sewer obligations. This conditional settlement agreement provides a framework for resolving Jefferson County’s overall sewer indebtedness and the Company’s exposure thereto through a consensual plan of debt
readjustment (the “Plan”).
If the Plan is implemented as contemplated, the Company’s losses with respect to Jefferson County are currently estimated to be within its established loss reserves.
Ask now off $1.03 For the first time today the ask has finally moved off $1.03 and is now at $1.08 so who ever was dumping shares has either stopped or decided to stop being so foolish
Ask at $1.03 all morning. Someone must be moving a lot of shares....the Ask has been at 1.03 and still there for the last 600,000 shares traded...any comments or insights?
preferred shares carried at liquidation value
The Company has 2,000 Series B Preferred shares authorized, all of which are issued and outstanding.
These shares have a par value of $120 per share and a liquidation preference of $100,000 per share.
Holders of these preferred shares shall be entitled to receive, in preference to the holders of common
shares, non-cumulative cash dividends at a variable rate equal to one-month LIBOR plus 1.00% per annum for periods prior to December 9, 2009 and at LIBOR plus 2.00% per annum thereafter, in each case calculated on an actual/360 day basis, when and if declared by the Board of Directors of the Company.
The holders of the preferred shares are not entitled to any voting rights and their consent is not required for taking any corporate action. Subject to certain requirements, the preferred shares may be redeemed, in whole or in part, at the option of Syncora Guarantee at any time or from time to time for cash at a redemption price equal to the liquidation preference per share plus any accrued and unpaid dividends thereon to the date of redemption without interest on such unpaid dividends.
Legg Mason largest institutional shareholder
As of March 31, 2013 Legg Mason owned 5.57 million shares which is 8.6% of the roughly 65 million outstanding shares
Small step could really be a big step
Jefferson County is taking another step to get out of the largest municipal bankruptcy in the country's history.
On Thursday Jefferson County Commissioners will vote on an agreement with creditors. These creditors hold about $105-million in general obligations warrants that were sold to fund road and other capital improvement projects.
On Tuesday, Commissioners announced the agreement. It calls for renewing payments on the debt, paying off the debt, establishing an interest rate of 4.9% and changing to a fixed rate rather than a variable rate.
The negotiations involved JP Morgan and German bank. The deal is seen as significant because JP Morgan holds a large portion of Jefferson County's massive sewer debt.
"I think it has an indirect impact. It surely sends the signal JP Morgan is at the table and talking. I don't think they would have entered into this agreement if they didn't have confidence the sewer would be resolved as well," said David Carrington, Jefferson Co. Commission President.
Commissioners will vote on the new agreement Thursday. The county hopes to have plan to get out of bankruptcy by the end of June.
Could be a big payout coming from Lehman eventually
May 03, 2013
(c) 2013 Dow Jones & Company, Inc.
Lehman Brothers Holdings Inc . is asking a bankruptcy judge to slash bond insurer Syncora Guarantee Inc .'s $1.3 billion claim against the failed investment bank related to dodgy residential-mortgage loans backing securities sold to investors.
In a bankruptcy court filing Thursday, Lehman's lawyers asked a judge to reject part of Syncora's claim against the bank, arguing it would be unfair to the mortgage investors whose holdings it agreed to insure.
"Having participated in the transaction solely for the protection of investors, Syncora should not---and under the Bankruptcy Code cannot---seek to have this court give equal priority to its claim and the claims of the investors and directly compete with them for the limited assets of LBHI's estate," Lehman said in papers filed in U.S. Bankruptcy Court in New York.
At issue is a structured-finance transaction where Lehman bought mortgage loans made by GreenPoint Mortgage Funding Inc . and through a process of financial engineering transferred the loans to a trust which then issued notes backed by the
loans.
Syncora, the monoline insurance subsidiary of Syncora Holdings Ltd ., sold insurance to the trust, GreenPoint Mortgage Funding Trust 2006-HE1, that guaranteed payments of principal and interest to investors.
Many of the mortgage loans, made at the tail-end of the housing bubble, went into default, putting Syncora on the hook for the shortfall in payments to investors. To date, according to court papers, Syncora has paid out $510 million under the policy.
Like fellow bond insurers Ambac Financial Group Inc . and MBIA Inc ., Syncora has sued a number of big Wall Street banks for misrepresenting the quality of loans backing securities sold to investors.
In the Lehman case, Syncora says it was duped into insuring the notes based on misrepresentations about the quality of the loans. It is seeking $1.3 billion---the amount it has already paid plus what it may be required to pay to mortgage investors---from the Lehman estate for breach of contract over any defective loans transferred to the trust.
That claim, Lehman says, put the insurer "directly at odds" with investors, who want Lehman to repurchase 11,534 questionable GreenPoint loans that were securitized through the trust. The trustee, for the benefit of the investors, has filed a $647.6 million "putback" claim against Lehman.
Lehman is asking U.S. Bankruptcy Judge James Peck to reject the portion of Syncora's claims that it hasn't yet paid out as contingent. Any other amount that is allowed by the court, Lehman says, should be ranked behind the investors' claim in the order of repayment.
A Syncora representative wasn't immediately available for comment.
Lehman, once Wall Street's fourth-largest investment bank, collapsed in the largest bankruptcy in history in September 2008. Since then a team of bankruptcy professionals under the direction of Alvarez & Marsal Inc . has managed the holding company's assets. Lehman's still-considerable balance sheet includes commercial real estate, private-equity investments, loans and derivatives contracts.
Lehman's holding company officially exited Chapter 11 protection in March 2012, but its estate continues to wrangle with creditors over billions of dollars in disputed claims.
Lehman has already distributed more than $47 billion under its $67 billion Chapter 11 plan. A fourth distribution is scheduled for Sept. 30.
Write to Patrick Fitzgerald at patrick.fitzgerald@dowjones.com.