Buffett offers to assume muni liabilities
Billionaire investor Warren Buffett said he offered to assume responsibility for $800 billion of municipal bonds guaranteed by MBIA, Ambac Financial Group and FGIC.
By Agencies |
NEW YORK: Billionaire investor Warren Buffett said he offered to assume responsibility for $800 billion of municipal bonds guaranteed by MBIA, Ambac Financial Group and FGIC. Buffett's Berkshire Hatha-way would put up $5 billion as part of the plan that would exclude subprime-related obligations.
One company has already rebuffed the proposal and the two others haven't responded, Buffett said. Buffett is attempting to take advantage of the distress among bond insurers by picking off the profitable municipal guarantee business and leaving MBIA, Ambac and FGIC with debt that has caused more than $5 billion in losses.
The three companies are struggling to maintain their AAA ratings after writedowns on the value of mortgage guarantees. ���If you gave up your entire municipal business, that's the book of business where the value in the companies is right now,��� said CreditSights Inc. analyst Robert Haines. ���You'd essentially be ceding that whole book to Buffett and what you'd be left with would be the book of business where all the troubles are.���
The bond insurers lend their AAA stamp to $2.4 trillion of debt, and are sitting on losses of as much as $41 billion, according to JPMorgan Chase analysts. Armonk, New York-based MBIA, which started as the Municipal Bond Insurance Association in 1974, Ambac and FGIC are reeling from their expansion beyond guaranteeing municipal debt to collateralised debt obligations, which repackage assets such as mortgage bonds and buy-out loans into new securities with varying risk.
One company has already rebuffed the proposal and the two others haven't responded, Buffett said. Buffett is attempting to take advantage of the distress among bond insurers by picking off the profitable municipal guarantee business and leaving MBIA, Ambac and FGIC with debt that has caused more than $5 billion in losses.
The three companies are struggling to maintain their AAA ratings after writedowns on the value of mortgage guarantees. ���If you gave up your entire municipal business, that's the book of business where the value in the companies is right now,��� said CreditSights Inc. analyst Robert Haines. ���You'd essentially be ceding that whole book to Buffett and what you'd be left with would be the book of business where all the troubles are.���
The bond insurers lend their AAA stamp to $2.4 trillion of debt, and are sitting on losses of as much as $41 billion, according to JPMorgan Chase analysts. Armonk, New York-based MBIA, which started as the Municipal Bond Insurance Association in 1974, Ambac and FGIC are reeling from their expansion beyond guaranteeing municipal debt to collateralised debt obligations, which repackage assets such as mortgage bonds and buy-out loans into new securities with varying risk.
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