Now that the transformation litigation, challenging the separation of the municipal finance guaranty business of National from the securitization guaranty business of MBIA Insurance Corp, has been dismissed, it is time for MBIA to take the next step: spinoff either National or MBIA Insurance to complete the structural separation of their separate businesses, and forever separate their disparate risk profiles and respective shareholder bases.
The investment merit of a spinoff at MBIA is obvious and recognized by MBIA management. Recently, MBIA CFO Chuck Chaplin stated in an interview with BTIG analyst Mark Palmer that he appreciated the thinking of those who argue that the natural owners of National and MBIA Insurance Corp. over the long run may be different types of investors. “I’m open to that argument,” he said. “When you have two businesses with very different risk and payoff profiles, the way to maximize value may be through a spin, or tracking shares, or other permutations. “It’s too early to say that is the case, but I could see it
Agreed. But then, Mr. Chaplin said something that strikes me as dead wrong: “At this point we think that the value of National can be maximized without separating it from MBIA Inc.,” he said. As for the spinoff, Mr. Chaplin said that "it’s not something that we’re contemplating at this time."