Bond insurer National Public Finance Guarantee Corp. has challenged Stockton, Calif.’s petition for a bankruptcy.
National filed the challenge in the U.S. Bankruptcy Court for the Eastern District of California, Sacramento Division, on Wednesday.
Under U.S. bankruptcy law, “a debtor must actually engage in meaningful negotiations with creditors,” National lawyers said in the filing.
Stockton was involved in a 90-day mediation period before it filed for bankruptcy.
Thursday is the final day for challenges to be filed to the bankruptcy. Fellow bond insurer Assured Guaranty has hinted that it too may challenge the bankruptcy.
Meanwhile, National’s parent company MBIA Inc. released its results for the second quarter late on Wednesday afternoon.
In the second quarter MBIA announced an adjusted pre-tax loss of $152 million. This compared to an adjusted pre-tax income of $161 million in second quarter of 2011.
The company’s adjusted book value was $31.23 per share on June 30, compared to $32.00 per share on March 31.
“The reduction in adjusted book value and the adjusted pre-tax loss for the three months ended June 30 were driven primarily by losses on insured exposures,” MBIA stated.
Net income available to common shareholders improved to $581 million, or $2.98 per share, for the second quarter compared to net income of $137 million, or $0.68 per share, for the second quarter of 2011.
While some analysts say the adjusted pre-tax income is the best measure of a bond insurer’s quarterly performance, it is not a Generally Accepted Accounting Principles measure.
For the second quarter MBIA’s pre-tax income, a GAAP measure, was $795 million. This compares to a $147 million loss in the second quarter of 2011.
MBIA’s U.S. public finance insurance business had $148 million pre-tax income in this year’s second quarter as compared to a $144 million pre-tax income in last year’s second quarter. “The modest improvement in pre-tax income in the second quarter of 2012 resulted from an increase in total premiums earned driven by higher refunding volume, partially offset by an increase in legal and litigation-related costs and expenses and a reduced benefit from loss and loss adjustment expenses,” MBIA stated.