MGIC Defers Interest Payment

Highlights include MGIC Investment Corp. (MTG), Ambac Financial (ABK), MBIA (MBI) and PMI Group (PMI).

MGIC Investment Corp.'s (MTG) recent announcement resulted in more than a 40% inter-day decline in the shares -- now more than 95% lower than when we placed our Sell recommendation on the shares on December 21, 2007.

The mortgage insurance business remains under pressure as fewer financial institutions are unwilling to make or refinance loans not under government programs without requiring the borrowers to have a "reasonable amount of skin in the game." This is a trend that may not change quickly, as valuation for securities remains significantly curtailed. Therefore, we would expect additional pressure on the shares of companies such as Ambac Financial (ABK), MBIA (MBI) and PMI Group (PMI).

On Wednesday, MTG sent notice to the undisclosed holder of its 9.0% convertible junior subordinated debentures (due in 2063 with an interest payment due April 1, 2019) that the company would defer for 10 years the interest on the debentures (April 1, 2019), but accrue at a 9.0% compound semi-annually.

When interest on the debentures is deferred, MTG is required to use reasonable commercial efforts to begin selling qualifying securities to persons who are not their affiliates. This would be called the Alternative Payment Mechanism. The net proceeds of the alternative payment mechanism sales are to be applied to the payment of deferred interest, including the compound portion.

Read the full analyst report on MTG

Read the full analyst report on PMI

Read the full analyst report on MBI

Read the full analyst report on ABK