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Tuesday, November 06, 2007

Egan Jones: Expect "Massive" Losses for Bond Insurers

by Calculated Risk on 11/06/2007 09:36:00 PM

From Bloomberg: MBIA, Ambac Losses Will Be `Massive,' Egan Jones Says

Bond insurers ... face ``massive losses'' over the next few quarters that could test their ability to raise new capital, Egan-Jones Ratings Co. said.

MBIA may lose $20.2 billion on guarantees and securities holdings, Sean Egan, managing director of Egan-Jones, said on a conference call today. ACA Capital may take losses of at least $10 billion; New York-based Ambac may reach $4.3 billion; mortgage insurers MGIC Investment Corp. and Radian Group Inc. may see losses of $7.25 billion and $7.2 billion, respectively, Egan said.

``There is little doubt that the credit and bond insurers face massive losses over the next few quarters and many will be capital challenged,'' Egan said.
Egan-Jones (not included in article) also expressed concern about possible major writedowns coming at Lehman and Bear Stearns. They commented that ResCap probably isn't sustainable without a capital injection. And for the homebuilders:
"Watch for some failures over the next couple of quarters."
UPDATE: From the WSJ: Morgan Stanley May Take Hit From Subprime
Two analysts are projecting the firm may take a fourth-quarter write-down of $3 billion to $6 billion. The estimates by analysts David Trone of Fox-Pitt, Kelton and Mike Mayo of Deutsche Bank AG ...
Another research firm, CreditSights, yesterday estimated potential fourth-quarter CDO hits at $9.4 billion for Merrill, $5.1 billion for Goldman, $3.9 billion for Lehman, $3.8 billion for Morgan Stanley and $3.2 billion for Bear Stearns.