Tuesday, November 13, 2007

ACA "Hypothetical Speaking....."

Four Month after this post the chart doesn´t look good....... What a surprise!

Vier Monate nach diesem Post hat sich die Lage offensichtlich nicht gerade verbessert...... Was für eine Überraschung!

ACA Capital Reports Financial and Economic Results

ACA Capital Holdings, Inc. (NYSE: ACA) today announced a third quarter 2007 net loss of ($1.0) billion, or ($29.42) per diluted share. The net loss was primarily a result of ($1.7) billion, or ($1.1) billion after tax, of net unrealized mark-to-market losses on the Company's portfolio of Structured Credit transactions.

Nice to see that they have still money to buy back shares.....

Schön zu sehen das immer noch genügend Geld vorhanden ist um Aktien zurückzukaufen.....

During the quarter, ACA Capital Holdings purchased 2.1 million shares or $14.9 million of its outstanding shares of common stock in open market transactions. The stock repurchase program began on July 27, 2007 and may be suspended or discontinued at any time without prior notice.
The quote from ACA and this Q+A “Understanding correlation is critical to everything we do” from a few month ago is just brilliant comedy if you are not a shareholder or even worse have bought billions of insurance from this company.....

Dieses Zitat und dieses Q+A File “Understanding correlation is critical to everything we do” von vor einigen Monaten ist nahe an guter Comedy wenn man nicht gerade Aktionär oder noch schlimmer einer derjenigen ist die Mrd an Absicherung von ACA erworben haben

ACA Capital’s Structured Credit business provides credit protection, using credit default swaps, on tranches of credit portfolios. We are primarily a seller of credit protection on tranches where the risk of loss is greater than that of the “AAA” rated level. We will sell credit protection below the “AAA” rated level but only when we see unusually strong value. The credits that underlie the portfolios on which we sell credit protection include corporate bonds and loans and mortgage and asset-backed securities

What was only a hypothetical question on the Nov. 7 th in the conference call what will happen after a downgrade from the single A rating the management said that ACA would face (hypothetical speaking....) an immediate liquidity call of $ 1.7 billion...... Now after S&P has finally eliminated the "hypothetical" just 2 days later and put ACA on the list for a possible downgrade from A this scenario described from Michael Panzner So Much For Being Hedged could lead to big trouble on balance sheets from banks and insurers.... And with actions like this Fitch Downgrades $37.2B Of CDOs, Slashing AAAs to Junk the pain is spreading fast......

Nachden noch am 07. November in der Telefonkonferenz die vollkommen abwegige Frage diskutiert wurde was denn passieren würde wenn ACA sein A Rating verlieren sollte und das Management daraufhin geantwortet hat das dann sofort eine zusätzliche Geldspritze von 1,7 Mrd $ notwendig wäre kann man nachdem S&P nur 2 tage später AVA auf die WL für ein downgrade gesetzt haben schon mal auf Betteltour gehen. Wahrscheinlich ist das dieses Szenario das Michael Panzner beschreibt So Much For Being Hedged einigen Banken und Versicherungen üble Löcher in die Bilanzen reissen wird. Und mit Meldungen wie diesen Fitch Downgrades $37.2 Billion of CDOs dürfte sich das Problem rapide weiter verschlimmern......

Here is one example from the German insurance giant Allianz. The have hedged one part and bought insurance from monolines for another ( I assume not ACA, they have bought from one the least weaker players like MBIA, I hesitate to rate anyone strong....)

Hier ist ein anschauliches Beispiel der Allianz. Die haben einen ganz gewichtigen Teil Ihrer Engagements entweder durch Shortpositionen und den Kauf einer Garantie abgesichert. Ich bin mir sicher das die Allianz niemals von ACA gekauft hätte. Sie haben sicher von einen der wenigen schwachen Spieler wie MBIA gekauft. Richtig stark auf der Brust ist aber keiner......

The WSJ has a related story Buffett Gets OpeningAs Bond Insurers TurnTo Berkshire for Succor

Das WSJ hat passend dazu heute Buffett Gets OpeningAs Bond Insurers TurnTo Berkshire for Succor eine passende Geschichte

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Blogger jmf said...

Fitch Downgrades $37.2 Billion of CDOs

4:43 AM  
Blogger jmf said...

Bank of America sees $3 billion loss on CDOs

NEW YORK (Reuters) - Bank of America Corp (NYSE:BAC - News), the second-largest U.S. bank, said on Tuesday it has suffered a $3 billion loss stemming from its exposure to collateralized debt obligations.

The pretax loss would be reflected in fourth-quarter results, and could grow if market conditions worsen, Chief Financial Officer Joe Price said at a Merrill Lynch & Co. banking and financial services conference.

Price also said Bank of America is setting aside more money for potential losses elsewhere, but considers the losses "manageable."

To be continued.....

8:12 AM  
Anonymous Anonymous said...


BofA is one of the companies interested in getting the M-LEC going so it's a good bet these writedowns are only the beginning for them.


8:36 AM  
Blogger jmf said...

Moin Eh,

i agree.

Today is the first day the German market didn´t respond to the positive US opening for months.

Deutsche was almost unchanged even with GS up 6 percent.....

Very unusual.

8:59 AM  
Anonymous Anonymous said...

"We are confident that we know how to evaluate these assets," Blankfein said.

Goldman's denial of pending writedowns is really pushing financials higher today.

Given recent history, you really have to wonder...Haven't we heard things like this before?


9:48 AM  
Blogger jmf said...

Moin Eh,

lets hope they havn´t bought their insurance from ACA.... :-)

I believe that GS is better than the rest. But they are not almost perfect as their tiny write down so far is suggesting

I think these comments will hit them really hard when they have to make the inevitable write down very soon

The have set the bar very high......

10:21 AM  
Blogger Edgar said...

Hi jmf,

Thanks for a look at that WSJ article. Did you see where B of A stock was up after the write down announcement? Up is down, right is left.

4:39 PM  
Blogger jmf said...

Moin Edgar,

nice dead cat bounce/squeeze for lots of stocks yesterday overall.

8:20 PM  
Blogger jmf said...

Senior ABS Recovery: I can imagine quite a bit...

Excellent explanation from Accrued Interest

In the meantime ACA slumped another 10 percent despite a 300 point Dow rally.....

1:01 AM  

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