Pershing Square’s Bill Ackman presented his plan for the bond insurers MBIA (MBI) and Ambac (ABK) today.
First, here it is:
Unlike the Buffett that would essentially leave the SFV (structured financial vehicle) portion of the company’s to shrivel away, Ackman’s plan calls the bluff of the company’s.
Rather than have the proceeds from the Municipal portfolio flow to the holding company, Ackman is saying “let them support the losses at the SFV portfolio”. Assuming the losses in SFV are as small as management says they are, this ought to work.
Now, the plan falls apart if the losses are as massive as Ackman claims they will be. In this case, the Muni proceeds will not cover the losses and the house of cards come tumbling down. This is what Ackman is banking on.
Either way he wins because if the Muni portfolio is providing liquidity to the SFV side, there are no dividends to flow up to the holding company’s. Without the dividends, there is no income or revenue for the insurers. Would you buy shares in a holding company with no revenues?
Me either….
Disclosure (none means no position): None
2 replies on “Ackman’s Plan: The Best so Far”
Felix Salmon of Conde Nast Portfolio.com blog gives you credit for posting the above link.
Vlado,
thanks for the heads up
at least he gives credit unlike “the fool”