MBI (MBI -3.30%) saw its share price drop 14.5% this week through September 22, according to data provided by S&P Global Market Intelligence. It closed Thursday at $ 9.75 and had a downward trend in early trading on Friday. Since the beginning of the year, the share price has fallen by about 40%.
Overall, it was a bad week like the S&P 500 it fell 2.9% through Thursday.
MBIA provides bond insurance, mainly municipal, as well as the management of fixed income investments. It is one of the leading bond insurers in the United States.
The share price fell earlier this week after mediation talks between the Puerto Rico Electric Power Authority (PREPA) and its bondholders ended over the weekend without a debt restructuring deal. The lack of an agreement has led to the hypothesis that disputes could arise between the two parties. As MBIA insures the bonds, this brought the share price down.
The share price also took a hit with the broader market when the Federal Reserve Board raised interest rates on Wednesday by another 75 basis points. The increase in interest had the effect of reducing MBIA’s book value due to the net unrealized losses on investments, which occurred due to higher interest rates and wider credit spreads.
It’s been a tough year for MBIA, but analysts expect the stock to recover in 2023, with an average price target of $ 15.50 when interest rates begin to stabilize in 2023.
In the short term, seek action related to the above situation in Puerto Rico. Later in the week, after the mediation was over, the judge in the case ordered further mediation between the two parties to find an agreement. So that crisis seems to be at least temporarily averted. PREPA is MBIA’s latest significant exposure in Puerto Rico through its subsidiary, National Public Finance Guarantee Corporation.
Dave Kovaleski has no position in any of the titles mentioned. The Motley Fool has no position in any of the titles mentioned. The Motley Fool has a disclosure policy.