MBIA (MBI) Stock Declines as Bond Issuers Suffer on Puerto Rico Debt Concerns

NEW YORK (TheStreet) -- MBIA (MBI) shares are down 14.06% to $7.15 on heavy volume Monday as investor concerns over Puerto Rico's debt crisis came to a head over the weekend.

The exact amount of liability is still being measured, according to Bloomberg, after Puerto Rico's governor said that the U.S. territory's $72 billion debt was unpayable.

Combined with Assured Guaranty (AGO), MBIA is liable for up to $9.4 billion of the island's debt.

Puerto Rico Governor Alejandro Garcia Padilla's admission to the New York Times that the country had no means to pay off its debt makes both insurer's stock unbuyable, BTIG analyst Mark Palmer said today, according to Bloomberg.

Palmer lowered his rating for both companies to "neutral" from "buy".

As of March 31, MBIA had about $4.5 billion of par exposure while Assured Guaranty had $4.9 billion of par exposure to Puerto Rico.

Assured Guaranty stock is down 10.96% to $24.42 in morning trading today.

TheStreet Ratings team rates MBIA INC as a Hold with a ratings score of C. TheStreet Ratings Team has this to say about their recommendation:

"We rate MBIA INC (MBI) a HOLD. The primary factors that have impacted our rating are mixed - some indicating strength, some showing weaknesses, with little evidence to justify the expectation of either a positive or negative performance for this stock relative to most other stocks. The company's strengths can be seen in multiple areas, such as its good cash flow from operations, expanding profit margins and notable return on equity. However, as a counter to these strengths, we also find weaknesses including unimpressive growth in net income, generally higher debt management risk and a generally disappointing performance in the stock itself."

Highlights from the analysis by TheStreet Ratings Team goes as follows:

  • Net operating cash flow has significantly increased by 97.87% to -$9.00 million when compared to the same quarter last year. In addition, MBIA INC has also vastly surpassed the industry average cash flow growth rate of 21.94%.
  • The gross profit margin for MBIA INC is currently very high, coming in at 79.00%. Regardless of MBI's high profit margin, it has managed to decrease from the same period last year. Despite the mixed results of the gross profit margin, MBI's net profit margin of 31.50% significantly outperformed against the industry.
  • The return on equity has improved slightly when compared to the same quarter one year prior. This can be construed as a modest strength in the organization. Compared to other companies in the Insurance industry and the overall market on the basis of return on equity, MBIA INC has outperformed in comparison with the industry average, but has underperformed when compared to that of the S&P 500.
  • 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 73.0% when compared to the same quarter one year ago, falling from $256.00 million to $69.00 million.
  • The debt-to-equity ratio is very high at 2.26 and currently higher than the industry average, implying increased risk associated with the management of debt levels within the company.
  • You can view the full analysis from the report here: MBI Ratings Report

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