NEW YORK (TheStreet) -- Shares of MBIA (MBI) - Get Report are up by 14.23% to $6.18 in early afternoon trading on Friday, rising the most since May 2013, as the Puerto Rico Electric Power Authority reached a tentative deal with bondholders to restructure its $8.2 billion of debt, Bloomberg reports.
MBIA insures $1.4 billion of PREP bonds, its largest exposure to the island, which is currently in an ongoing financial crisis featuring $70 billion of outstanding debt.
Under the agreement reached between MBIA and PREP, the insurer will provide about $450 million if PREP defaults on its debts.
This will set in motion a restructuring of debt that could potentially avert a default on $196 million of interest that is due January 1.
Recently, TheStreet Ratings objectively rated this stock according to its "risk-adjusted" total return prospect over a 12-month investment horizon. Not based on the news in any given day, the rating may differ from Jim Cramer's view or that of this articles's author. TheStreet Ratings has this to say about the recommendation:
We rate MBIA INC as a Sell with a ratings score of D+. This is driven by a number of negative factors, which we believe should have a greater impact than any strengths, and could make it more difficult for investors to achieve positive results compared to most of the stocks we cover. The company's weaknesses can be seen in multiple areas, such as its deteriorating net income, generally high debt management risk, disappointing return on equity, poor profit margins and weak operating cash flow.
Highlights from the analysis by TheStreet Ratings Team goes as follows:
- The company, on the basis of change in net income from the same quarter one year ago, has significantly underperformed when compared to that of the S&P 500 and the Insurance industry. The net income has significantly decreased by 120.2% when compared to the same quarter one year ago, falling from $173.00 million to -$35.00 million.
- The debt-to-equity ratio is very high at 2.31 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company.
- Return on equity has greatly decreased when compared to its ROE from the same quarter one year prior. This is a signal of major weakness within the corporation. When compared to other companies in the Insurance industry and the overall market, MBIA INC's return on equity is below that of both the industry average and the S&P 500.
- The gross profit margin for MBIA INC is currently extremely low, coming in at 4.35%. It has decreased significantly from the same period last year. Along with this, the net profit margin of -38.04% is significantly below that of the industry average.
- Net operating cash flow has significantly decreased to $8.00 million or 82.60% when compared to the same quarter last year. In addition, when comparing to the industry average, the firm's growth rate is much lower.
- You can view the full analysis from the report here: MBI