Goldman Sachs Notes An Insurer Worth Zero In Run-Off (SCA, MBI, ABK)

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Security Capital Assurance Ltd. (NYSE: SCA) has been terminated from coverage at bulge bracket firm Goldman Sachs after the company has seen shares plummet over recent months.  The company noted that all three ratings agencies have downgraded the credit rating of the bond insurer.  This notes the probability that the company will either struggle or will be ultimately unable to write new business entirely because it doesn’t have a Triple-A rating. 

Goldman Sachs has outlined ratings on this and other with several scenarios.  Its value for SCA in a run-off scenario now sits at ZERO.  It has been negative on financials.  Goldman Sachs previously gave a valuation matrix under multiple scenarios for the bond insurers.

SCA stock has traded over $30.00 in the last year.  Ambac Financial (NYSE: ABK) just cut its dividend to almost nothing.  Both it and MBIA Inc. (NYSE: MBI) are seeking rescue packages partly in order to keep their respective "Triple-A" ratings as well.  While their stocks have also been disasters, they might want to consider this scenario here.  The clock is ticking.

Jon C. Ogg
March 3, 2008