MGIC raises $1.1 bn from stock, notes to beef up capital - MTG, RDN & GS
Northern, WI 03/08/2013 (avauncer) - MGIC Investment Corp. (NYSE: MTG), private mortgage insurance service provider in the US, has collected $1.1 billion from stock and bonds as the company strengthens the weakening unit that backs housing loan.
MGIC generated $450 million through convertible senior notes and 135 million by selling stock for $5.15 a share, the company said in a statement. The stock dipped 7.8 percent to $5.17 in opening trade in New York. The stock closed with some gain at $5.34 on March 5, before MGIC announced about selling shares.
Company’s CEO Curt Culver, 60, is raising capital after evaluating a risk regarding capital topping limits fixed by some regulators.
“There seems to be a broad consensus from both parties in Washington that the federal government needs to continue to reduce its role in the mortgage markets, making room for sources of private capital like the mortgage-insurance industry,” Mark DeVries, an analyst at Barclays Plc, said.
Largest US mortgage insurance firm Radian Group Inc. (NYSE:RDN) generated $689 million last week in capital excluding commissions and other expenses by selling stock and notes. The company’s stock jumped 57 percent this year as MGIC nearly doubled.
MGIC’s risk to capital ratio at its core insurance unit was 44.7-to-1 reported till December 31 at the time of quarterly results announcement, the company said. The measure beats the risk limit of 25-to-1 fixed by state regulators, after the insurance major was unprofitable for consecutive six years. The stock traded on $70 or above in 2006.
In five out of the past six years, Radian has been unprofitable owing to mounting losses resulted from the real estate slump. Mortgage insurers have to cover up losses when home buyers default and foreclosures be unsuccessful in recouping costs.
Goldman Sachs Group Inc. (NYSE:GS) took the responsibility to manage MGIC offerings. MGIC in the beginning had a plan to sell 135 million shares and notes worth $350 million.
The shares of MGIC Investment Corp. (NYSE: MTG) were down by 0.61% and currently trading at $4.89
The shares of Radian Group Inc. (NYSE:RDN) were up by 1.76% and currently trading at $9.53
The shares of Goldman Sachs Group Inc. (NYSE:GS) were down by 2.54% and currently trading at $152.72