MBIA Inc., the largest bond insurer, will be a profitable investment for Fairholme Capital Management LLC even if it can’t underwrite new business, said Bruce Berkowitz, the founder of the $17 billion investment firm.
“Do they have the wherewithal even if they don’t write another piece of business? Yes,” said Berkowitz, 52, who disclosed an 11 percent stake in MBIA this month, making him the second-largest shareholder of the Armonk, New York-based firm.
Investors are overestimating potential losses and undervaluing MBIA even as the company is unable to write new contractsinsuring debt from cities and states more than two years after being stripped of its top financial guarantee ranking, Berkowitz said. Fairholme’s MBIA stake is part of a broader wager on financial firms including American International Group Inc. and Citigroup Inc. that were pummeled during the credit crisis.
“You have institutions, where there is tremendous fear, disgust, hate. Where taxpayers, in some instances, have paid to bail them out,” Berkowitz, who’s based in Miami, said in a telephone interview. “The pricing reflects the pessimistic attitude.”
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“Do they have the wherewithal even if they don’t write another piece of business? Yes,” said Berkowitz, 52, who disclosed an 11 percent stake in MBIA this month, making him the second-largest shareholder of the Armonk, New York-based firm.
Investors are overestimating potential losses and undervaluing MBIA even as the company is unable to write new contractsinsuring debt from cities and states more than two years after being stripped of its top financial guarantee ranking, Berkowitz said. Fairholme’s MBIA stake is part of a broader wager on financial firms including American International Group Inc. and Citigroup Inc. that were pummeled during the credit crisis.
“You have institutions, where there is tremendous fear, disgust, hate. Where taxpayers, in some instances, have paid to bail them out,” Berkowitz, who’s based in Miami, said in a telephone interview. “The pricing reflects the pessimistic attitude.”
Read the rest of the story at bloomberg.com
