Buffett offers to reinsure $800 bln in muni bonds

Buffett offers to reinsure $800 bln in muni bonds
By Dan Wilchins Reuters - Tuesday, February 12 11:51 pm

NEW YORK (Reuters) - Warren Buffett said on Tuesday that he had offered to reinsure $800 billion (408 billion pounds) of muni debt guaranteed by bond insurers, but shares in MBIA and Ambac Financial Group slid as investors recognized that the billionaire investor's plan was far from a panacea.

Berkshire Hathaway's chief executive told CNBC television that he had extended the offer to MBIA, Ambac and FGIC Corp, and so far one of the three had rebuffed him. The reinsurance would cover about a third of the $2.4 trillion of debt guaranteed by U.S. bond insurers.

Investors said the bond insurers had good reason to reject the offer. Buffett said he would charge premiums of 50 percent above what the bond insurers are receiving from issuers on the policies, which many analysts saw as a high price.

Buying the coverage from Buffett would leave insurers with fewer safe assets to offset risk from their toxic ones.

"We would be delighted if this transaction occurred," said T2 Partners LLC Managing Partner Whitney Tilson, whose firm has bet against MBIA and Ambac through short sales. "It would enrich Berkshire Hathaway and impoverish MBIA and Ambac."

Still, the broad stock market welcomed the offer, which allayed fears that the bond insurers' difficulties would force investors to sell billions of dollars of tax-exempt municipal bonds. Any forced sales could depress bond prices and lift borrowing costs for cities and consumers.

Equities rose, and U.S. Treasury bonds dropped, implying that investors were more willing to buy risky assets. But MBIA shares fell 15.3 percent to $11.50 on the New York Stock Exchange, while Ambac dropped 15.1 percent to $8.90.

Bond insurers are expected to make billions of dollars in payments in the future after guaranteeing bonds like collateralized debt obligations (CDOs), subprime mortgage securities, and other risky debt.

These expected payouts have spurred ratings agency Fitch to strip Ambac and FGIC's main insurance units of their top triple-A credit ratings. Standard & Poor's has also cut the FGIC unit's ratings.

Buffett said reinsurance would shore up municipal bonds, but would not help the CDOs.

"I'm not sure anything is going to do much for the CDOs," Buffett said.

WRITE-DOWNS AND HEARTACHE

A bank group is working to rescue Ambac's main insurance unit, and a second group is trying to rescue FGIC's main unit. Both groups are hoping to keep the businesses intact, but if necessary, the good muni business could somehow be separated from the bad CDO and structured finance business, a person briefed on the matter said.

Eric Dinallo, New York's insurance superintendent, is working with banks on possible solutions.

Following news of Buffett's offer, Dinallo said in a statement on Tuesday: "I am pleased this provides one more option to protect muni bond issuers and investors."

Buffett would not say which bond insurer had turned down his offer, but CNBC later reported that the refusal came from Ambac.

Ambac and MBIA officials declined to comment. FGIC, whose owners include mortgage insurer PMI Group and private equity firms Blackstone Group , Cypress Group and CIVC Partners LP, did not return a call seeking comment.

The offer comes after Buffett started selling municipal bond insurance himself, which he is trying to get approval to do in all U.S. states.

Getting approvals may take time. That, combined with working with rating agencies to get top ratings, means that buying into a bond insurance business probably makes more sense than starting one up, Wilbur Ross told Reuters on Monday. Ross is looking at investing $1 billion in a bond insurer.

Buffett's offer includes a 30-day clause to allow the bond insurers to come up with a better deal.

Ambac had guaranteed a total of $524 billion of debt as of year end, while MBIA insured $679 billion. FGIC insured $314.8 billion as of September 30.

Among U.S. bond insurers, about two-thirds of their exposure is related to municipal debt, and about a third is structured finance like CDOs, according to Fitch.

Write-downs have eaten into the insurers' capital and endangered the top credit ratings that are crucial for their business.

Ratings downgrades are bad for bond insurers, but may be even worse for credit markets. If bond insurers lose their "triple-A" ratings, the securities they guarantee would also be downgraded, and investors that can only hold top-rated assets would be forced to sell their insured holdings.

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バフェットがモノラインを「救済」？
[ 03:10 ] [ アメリカ株 ]
[ スライドショウ ]
今日ウォーレン・バフェットがＭＢＩＡ、アムバック、ＦＧＩＣの３つのモノライン・インシュアラーが保有する８千億ドル相当のミュニ・ボンドをリインシュアー（再保険）する提案をこの３社に示したことが報じられました。これを受けてニューヨークの株式市場は高く始まっています。

しかし、、、


これは別にバフェットがお人よしだからやっていることではないと思うんです。
そもそもミュニというのは地方政府が出す債券ですから、殆どデフォルトしません。歴史的なデフォルト率は１％以下です。また、それらの地方政府はモノライン・インシュアラーよりそもそも信用度が高いところが多く、信用度の低いモノライン・インシュアラーが殆どデフォルトしない地方政府のストップ・ギャップになるという構図自体にどこか滑稽なものを感じるわけです。

でも慣習として（？→このトンマな仕組みは株の人間である僕には到底理解できません。債券畑の人がこれを読んでいたら教えてください。）それらのミュニにもインシュアランスが付いていないと債券を買わない人が多いのでしょうね。

つまりバフェットは本来、再保険をかける必要すら無いものに再保険を提供すると言っているわけで、これは今、自己資本比率を下げないように綱渡りを強いられているモノラインの連中の足許を見た、オポチュニスティック（だめもと）でプレデタリー（強奪的）な提案だと思うのです。

勿論、モノライン・インシュアラーは虎の子であるミュニをバフェットに進呈することで自己資本比率の改善にはなりますけど、それは「残りカス」だけを背負い込むゾンビー（生きる屍）会社になることを意味すると思うのです。

今日、アムバックやＭＢＩＡの株が急落したのはそのため。
[ 更新日時：2008/02/13 03:30 ]