Author Topic: AMBC - Ambac Assurance Corp  (Read 27857 times)

TheEnterprisingInvestor

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Re: AMBC - Ambac Assurance Corp
« Reply #40 on: March 21, 2014, 11:06:20 PM »
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But even assuming he is right that AMBC intrinsic value is much safer than SYCRF intrinsic value, I still think he is wrong that AMBCW price is safer than SYCRF price. SYCRF won't go to $0 unless it goes bankrupt, while AMBCW could go to $0, even if AMBC's intrinsic value is $30 or whatever. Bond insurance is risky enough without adding timing risk from warrants.

Personally I like Syncora since I believe they have less legal uncertainty than Ambac, now that JPM and Jefferson County are resolved. I have no edge in legal stuff.

What do you think about problem credits and potential claims in 2017 - 2019? Their disclosed credits just don't seem that bad. I could see taking say a $100M haircut in the next few years if their portfolio deteriorates, but don't see how equity could get wiped out.

I don't agree with him either and actually own more Syncora than Ambac after the recent run-up. Right now Syncora is pretty much being run by lawyers rather than the management. I also find it hard to see equity getting wiped out. A systematic risk that could happen is the potential bomb from PR, which is now being delayed by 2 more years when it showed the ability to tap the Muni market. Based on the numbers from the the supplementary statements, Syncora has been gradually commuting away exposures like other Muni insurers in the past few years.

There is a investor's hub forum for Syncora that goes all the way back to 2007 or 2008.
http://investorshub.advfn.com/Syncora-Holdings-Ltd-SYCRF-12091/

While pretty much none of the folks I know have 100% grasp on the credit side. There is more potential recovery (~$300M conservative estimate or $5/share) from the legal standpoint. I am pasting the analysis done by alzhus101 in the forum:

1. Greenpoint / Lehman lawsuit..
25% recovery on damages north of $527M or $125M-$250M estimate

2. Greenpoint/Capital One
$300M estimate.. 80% of that is $240M

Also there is the lawsuit for fraud against McQuire on Alinda's American Roads and some claim against BP for lack of toll bridge traffic around the Alabama area caused by oil spoil. The results from these two are more difficult to predict.

In addition, there is a potential optionality from the $3B NOL / release of the full VA against $1.2 B of DTA ($20/share) that may make it an attractive takeover candidate for firms like Assured Guaranty.

While I admit I could have missed some Black swan credit event in its portfolio and the global economy may take a turn for the worse taking every single credit down to the toilet in the next recession or so, I feel the current margin of safety including future claims and the attractive asymmetric risk-reward worth taking a decent position on it and am willing to wait for additional claims and hopefully eventual business writing.

I don't think the NOL makes it a takeover candidate, a change in control usually wipes out NOLs.  It may be a takeout candidate for other reasons, the NOL probably isn't one.


yitech

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Re: AMBC - Ambac Assurance Corp
« Reply #41 on: March 21, 2014, 11:19:55 PM »
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I don't think the NOL makes it a takeover candidate, a change in control usually wipes out NOLs.  It may be a takeout candidate for other reasons, the NOL probably isn't one.

There are ways to get around loss of NOLs. I am sure Google used quite a bit of Motorola NOLs. (http://www.reuters.com/article/2011/08/31/us-motorolamobility-google-tax-idUSTRE77U1QX20110831) Of course not all of them will be used, but the potential value is there to be unlocked. Takeover is just speculation. That's why I specifically said "optionality."

NOL is subject to section 382 limitations.
http://www.valuationresearch.com/knowledge-base/tax-insight/valuation-considerations-relating-section-382-limitations

SECTION 382 LIMITATION
After an ownership change, the new loss corporation may only deduct its pre-change losses against taxable income in an amount equal to the Sec. 382 limitation amount. There are two components to the Sec. 382 limitation: 1) base limitation, which is driven by the value of the stock, and 2) built-in gain/loss, which is driven by the value of the assets.

The Sec. 382 base limitation amount is approximated using the following equation:

   Fair Market Value of Old Loss Corporation Stock
x Federal Long-term Tax Exempt Rate
   Section 382 Base Limitation

The fair market value is subject to potential adjustments described in the regulations, and the federal long-term tax exempt rate is published monthly in the Internal Revenue Bulletin.

In order to utilize its NOLs, a company will strive to calculate the largest Sec. 382 limitation amount possible. As mentioned previously, the base limitation amount is driven by the value of the stock. Determining the value of the stock involves a consideration of the following:

• All classes of loss company stock, including the pure preferred stock immediately prior to the change. Preferred stock
  with similar terms, rights and preferences should be valued equally.

• For publicly traded companies the IRS has acknowledged that the stock value does not necessarily equal the trading
  value on an exchange, i.e. certain blocks of stock may have higher value due to control rights.

• For privately held companies, different classes of stock may have different rights and vary in value.

A full discussion of recognized and net unrealized built-in gains and losses is beyond the scope of this article, but it is important to note that if you have a built-in loss it is best to hold onto it for at least the five year recognition period. Otherwise, you will be increasing the NOLs subject to Sec. 382.
« Last Edit: March 22, 2014, 12:14:42 AM by yitech »

BargainValueHunter

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Re: AMBC - Ambac Assurance Corp
« Reply #42 on: April 22, 2014, 07:44:01 AM »
http://www.marketwatch.com/story/ambac-announces-proposed-amendments-to-the-plan-of-rehabilitation-of-the-segregated-account-2014-04-21

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There would also be a proportionate redemption of surplus notes, excluding junior surplus notes. Using unpaid policy claim balances as of December 31, 2013, total catch-up payments of Deferred Amounts, together with accrued interest thereon, would be approximately $1.1 billion. Using balances as of December 31, 2013, total proportionate payments on the Surplus Notes (excluding Junior Surplus Notes) would be approximately $415 million.
Albert Einstein called compound interest "the greatest mathematical discovery of all time".

yitech

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Re: AMBC - Ambac Assurance Corp
« Reply #43 on: April 24, 2014, 08:48:51 AM »
From Q1, 2014 of the Arbitrage Credit Opportunities Fund on Ambac and Syncora's surplus notes
https://www.arbitragefunds.com/restricted/get/259/ACOF_2014_Q1_Commentary.pdf

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During the first quarter a number of our refinancing and merger-related positions were tendered or redeemed. These include Accellent 8.375% and 10.0% Notes which were refinanced in conjunction with the company’s acquisition of Lake Region Medical, and Oneok 5.2% notes which were redeemed as part of the company’s plan to separate its natural gas distribution business from its natural gas gathering and processing business.

The largest performance drivers for the quarter were Syncora Surplus Notes and Ambac Surplus Notes which make up our “Mortgage Put-Back Litigation” bucket. GSAT 8% Convertible Notes were another top performer as the equity and convertibles continued to rise on building confidence of FCC approval to convert the company’s mobile satellite spectrum to terrestrial use.

Our weakest performers were each related to idiosyncratic events that impacted individual companies. These included Endeavour International 1st and 2nd Lien Bonds (a stuck valve in one of the company’s key North Sea production sites impacted results and liquidity); and Midwest Vanadium which experienced a fire at its Australian vanadium mine just as production was ramping. We have since exited the Midwest Vanadium position due to the increased length of recovery for the assets and significant doubts about the company’s prospects.

The Mortgage Put-Back Litigation mentioned above relates to our investment in the surplus notes of bond insurance companies Ambac Financial Group and Syncora Holdings. Prior to the financial crisis, bond insurance companies insured or “wrapped” pools of mortgages against the risk of default. As part of this securitization process, the mortgage originators provide guarantees, known as representations and warranties, that these mortgages meet an agreedupon level of underwriting due diligence and credit worthiness. As the financial crisis ensued and mortgage defaults skyrocketed, bond insurers came under serious financial stress; they were responsible for paying out claims to banks and investors for defaulted securities. However, the bond insurers claimed the originators failed to meet their representation and warranty obligations, and, as a result, the bond insurers had the right to “put back” impaired loans to the underwriting banks and mortgage originators.

We have closely followed monoline insurance company litigation against mortgage underwriters, and we believe precedent court rulings and legal settlements support the respective cases of Ambac and Syncora to receive close to 100% of damage claims against the banks in outstanding court cases.

Ambac currently has pending litigation against several parties, including Bank of America and JPMorgan, with damage claims that we estimate total $4.75 billion. Syncora recently entered into a settlement with JPMorgan whereby JPMorgan agreed to pay $400 million in return for a release of all claims; this settlement implied a recovery of close to 100% of estimated damage claims. We estimate Syncora also stands to recover damages close to $300 million as an indirect beneficiary of litigation against Greenpoint Mortgage Funding. A number of announcements led to the notes’ positive contribution to portfolio returns in Q1. These include the settlement between Syncora and JPMorgan, Bank of America’s disclosure in its 10-K filing of an additional $500 million of claims by Ambac, and Puerto Rico’s access to the bond market and the reduction of its overall default risk. These factors have increased our confidence in the ultimate recovery on the surplus notes. We estimate that, with proceeds from expected settlements with counterparties in the next two years, asset values at Ambac and Syncora cover the surplus notes by 3.9x and 1.5x, respectively. Purchasing these surplus notes at significant discounts to their accreted value could provide significant returns. As always, we have balanced this return opportunity with the potential downside risk, and sized our positions accordingly.

BargainValueHunter

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Re: AMBC - Ambac Assurance Corp
« Reply #44 on: September 10, 2014, 11:09:37 AM »
http://www.valuewalk.com/2014/09/deal-in-detroit-bankruptcy-case/

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Syncora to recover 26% in Detroit bankruptcy

According to Syncora spokesman Steven Schlein, the firm would recover around 26% of its claim with the negotiated settlement.

Details of the deal include Syncora Holdings Ltd. (OTCMKTS:SYCRF) receiving $23.5 million in cash for a $120 million bond.

The firm also receives a long-term lease to manage the parking structure under Grand Circus Park. Syncora is required to make $13 million in improvements to the facility, but is guaranteed $21.6 million in revenue from the parking garage. The city receives 25% of the revenue during the term of the lease.

Syncora also receives an extended lease from 2020 to 2040 as well as net revenue from the Detroit side of the Windsor (Ontario) tunnel. Analysts say this comes to around $4 to $5 million a year.
Albert Einstein called compound interest "the greatest mathematical discovery of all time".

muscleman

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Re: AMBC - Ambac Assurance Corp
« Reply #45 on: December 25, 2015, 10:46:33 AM »
Does anyone still own AMBC or Syncora?
It has been a difficult year for AMBC, Syncora and MBIA. AGO seems to have done ok.
http://www.prnewswire.com/news-releases/syncora-holdings-ltd-successfully-completes-mta-amendments-and-executes-intercompany-capital-support-agreement-300132257.html

The liquidity seems to have improved. I am still not sure if they are able to figure out the liquidity mismatch problem after 2017. Thoughts?

http://www.prnewswire.com/news-releases/syncora-holdings-ltd-announces-2014-gaap-financial-results-300074664.html
The GAAP result shows Adjusted book is $2 per share. Not that great. If no business is written then the $2 will be received after 20-30 years. Deducting management expenses during these years, I think there will be no money left for shareholders.

Can anyone please help me understand the bull thesis?

I am muslceman. I have more muscle than brain!

yitech

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Re: AMBC - Ambac Assurance Corp
« Reply #46 on: April 14, 2016, 03:46:35 AM »
Syncora book value went up 6-fold YoY (from $1.02 to $5.96) with 56.3M shares outstanding.


BargainValueHunter

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Re: AMBC - Ambac Assurance Corp
« Reply #47 on: April 14, 2016, 05:32:02 AM »
Syncora book value went up 6-fold YoY (from $1.02 to $5.96) with 56.3M shares outstanding.


Wow. Thanks for the head's up...will take a closer look at this one.
Albert Einstein called compound interest "the greatest mathematical discovery of all time".

misterkrusty

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Re: AMBC - Ambac Assurance Corp
« Reply #48 on: October 17, 2020, 11:01:46 AM »
Trial date set for February 22, 2021.  Anyone else getting excited?