Syncora Holdings Ltd. yesterday for the 12th time postponed the deadline on its offer to buy bonds it insures in a bid to jettison toxic debt from its insured book.
The Bermuda-based insurer, on behalf of the BCP Voyager Master Funds SPC Ltd., in March offered to buy from bondholders $5.9 billion in residential mortgage-backed securities insured by the company.
Under the offer, bondholders would effectively swap their Syncora-insured RMBS for an uninsured RMBS with the same face value, plus a consideration.
The idea is to clear risky policies off the Bermuda-based insurer's books. If Syncora is no longer insuring these bonds, the company would not have to pay claims should the bonds default.
The company most recently postponed the deadline from June 26 to July 10. On July 10, it postponed the deadline to 4:59 p.m. today.
Under New York State law, Syncora must maintain at least $65 million in policyholders' surplus, or assets in excess of liabilities. When the credit quality of debt insured by Syncora deteriorates, the company has to reserve money to cover expected losses.
Beginning last year, Syncora began establishing significant reserves to cover anticipated losses on credit default swaps, collateralized debt obligations secured by asset-backed securities, and debt secured by mortgages and home equity lines of credit.
The reserves reduce the company's assets and thus its policyholders' surplus.
At the end of March, Syncora reported a policyholders' deficit of $3.8 billion. The deficit was actually more than $1 billion deeper than that. The New York Department of Insurance allowed the insurer to use certain accounting assumptions resulting in lighter reserves, thus eating a more moderate chunk out of assets.
Syncora hopes stripping the bonds of insurance will enable the company to free reserved money back into asset accounts, increasing the policyholders' surplus.
In May, the company estimated that if the tender offer is successful, it would add about $705 million to its policyholders' surplus.
At the latest tally, bondholders tendered $2.49 billion of their RMBS, which means $154.8 million in bonds were tendered since the June 26 deadline.
Bondholders have now tendered or committed to tender bonds that would reduce Syncora's exposure by 62.7 "remediation points," which is an abstract term the company uses to describe the amount of potential claims losses taken off its books by buying insured bonds.
The company is targeting 72 remediation points to complete the deal.
At the end of last year, Syncora insured $133.73 billion in debt, including $52.41 billion in municipal bonds.
