Bond insurer MBIA (MBI)
is looking better in the eyes of one analyst group as long as the monoline is close to settling years-old litigation regarding the bifurcation of its insurance operations.
Research and investing firm BTIG
released a report suggesting challenges to MBIA's transformation could be resolved in a settlement in the near future. BTIG said such an action could result in shares nearly tripling "in a post-announcement short squeeze."
The remaining litigation is over a complaint filed by 21 banking entities in 2009, challenging MBIA
creating a second firm using $5 billion siphoned off from the company's original insurance subsidiary.
In the past year, dozens of plaintiffs have dropped out of the suit, resulting in only a handful of financial firms left as plaintiffs. BTIG's report and a recent Wall Street Journal article suggest the remaining parties could also be close to some type of settlement.
Such a settlement would be a boon for the insurer, BTIG reported.
"Following almost four years of uncertainty during which its status as a viable entity has been in question, MBIA appears closer to resolving the various challenges it faces, unlocking the value of National Public Finance Guaranty Corporation
– the company's public finance unit – to the benefit of shareholders, and resuming its role as one of the last remaining players within that industry," the BTIG report concluded.
Write to Kerri Panchuk