MGIC Delays Interest Payments for 10 Years
[Update 1: Clarifies the deferral of payments to noteholders.] Mortgage insurer MGIC Investment Corp. (MTG) is delaying for a decade an upcoming interest payment to certain noteholders. The company said in a Securities and Exchange Commission filing Monday it will defer an interest payment originally due October 1. MGIC will delay the payment for 10 years -- until Oct. 1, 2019 -- on its 9% convertible junior subordinated debentures due 2063. It's not the first such payment deferral amid ongoing capital restructuring plans. MGIC said in its earnings report for the quarter ended June 30 it had deferred an interest payment from April 1, 2009 to April 1, 2019. Deferred interest will continue to accrue and will compound on a semi-annual basis, the company said. Mortgage Guaranty Insurance, MGIC’s principal subsidiary and a substantial private mortgage insurance provider, in early August revealed plans to delay its first capital infusion into MGIC Indemnity Corp., which is slated to begin writing new mortgage insurance business as of Jan. 1, 2010, according to past HousingWire coverage. MGIC said the Office of the Commissioner of Insurance of Wisconsin approved the delay as the company attempts to have MIC approved as an eligible mortgage insurer by mortgage giants Fannie Mae (FNM) and Freddie Mac (FRE). It also said at the time it will likely reduce the amount planned for the MIC capital contribution. Fitch Ratings downgraded MGIC's insurer financial strength to triple-B minus from triple-B after a $339.8m quarterly loss. The ratings agency noted, however, that a capital restructuring and the formation of MIC would allow MGIC to continue to operate in the midst of increasing mortgage delinquencies. MGIC shares slipped to $9.06 at closing Monday, but recovered slightly and were trading at $9.50 early Tuesday. Write to Diana Golobay.