MBI Weakness persists in stocks with Puerto Rico exposure: MBI, AGO, AMBC, BPOP, OFG, FBP all seeing continued pressure (5.67 -0.70)
Fears continue to mount in Puerto Rico as the government lobbies U.S. lawmakers to change their treatment of the commonwealth and allow it to declare Chapter 9 bankruptcy so it can restructure its municipal debt. Barring a last minute development, Puerto Rico's PREPA utility is expected to miss tomorrow's $400 mln debt payment. Several stocks continue to see a negative response to the situation:
Bond insurers Assured Guaranty (AGO -1.5%) and MBIA (MBI -12.5%) have exposure to PREPA should it fail to meet its July 1 interest payment. Harry Fong from MKM Partners estimates AGO's totaled exposure to PREPA at $1.13 bln while MBI's at $2.1 bln.
Puerto Rico also has a $655 mln payment due tomorrow as well. For the broader Puerto Rico debt crisis, in their latest annual filings, the insurers disclosed the following exposures to Puerto Rico:
AGO: Estimated aggregate $4.9 billion net par in obligations as of March 31, 2015
MBI: Estimated $4.5 billion of gross insured par exposure
AMBC: Estimated total net par outstanding to various Puerto Rico exposures with a total par of $2.44 bln
Shares in the aforementioned names have been under significant pressure in recent sessions after Puerto Rico's Governor said the commonwealth would be unable to pay its almost $72 bln in debts
Banks with Puerto Rican exposure such as Popular (BPOP -12%), OFG Bancorp (OFG -11%) and First Bancorp (FBP -4%) also continue to see sharp declines today.
Finally, this morning, S&P lowered their credit rating on the commonwealth to CCC-minus, saying a default, distressed exchange, or redemption seems inevitable within the next six months.
