Replies to post #1623 on Scottish Re Group Ltd (fka SKRRF)

[h_man_investor]

"What are they waiting for" is an easy question to answer. They are waiting for the book value to continue to increase effectively earning the discount rate if they sold. Its a waiting game and they will maximize the recovery of their investment. Since they will not be writting any business its hard to imagine a scenario where they would want to be common shareholders.

I agree on your point of resetting the conversion rate but that will only increase the number of shares they convert into. The conversion price will always equal $600mm- if the conversion price decreases the number of shares will increase. This should not affect the preferred but will dilute the common more and decrease to book value.

[bwana12]

I also do not understand what they are waiting for, other than the right moment to sell a large block of Subprime RMBS's. ALL the value to Pref's, Converts and common is lying right there.

Don't foget CC has $700 million face of Orkney Re's debt. Most of the holdings are 2006 vintage, AA's, whose value will become much clearer in the next year or two. CC has to be one of the largest holders on RMBS and private-issue home mortgages (via GMAC). They know the business. Also, one has to consider two additional sources of value: NOL's and VIE's. I can see $300 million right there. How will they play those cards?

Getting back to my question (which you did not answer): what is the upside from here for CC versus pref's or the common? How do avoid giving significant value to the common? All the common is worth $13 million! Versus $600 for the Convts! C'mon, even at $1.00 per share it makes sense for them to buy the common out, IMO.