MGIC shares fall on delayed payment
Shares of MGIC Investment Corp. plunged Wednesday after the mortgage insurer said it would defer an interest payment on a debt for 10 years.
THE SPARK: The company disclosed in a regulatory filing Tuesday that it is postponing its interest payment on $389.5 million of convertible debt until 2022. The payment was scheduled to be paid on Oct. 1.
THE BIG PICTURE: MGIC is trying to free up as much cash as possible as it copes with the continued impact of the weak housing market.
Mortgage insurance is typically required for borrowers who are unable to afford a 20 percent down payment. The industry suffered mounting losses as mortgage defaults skyrocketed during the housing meltdown, leading to a spike in claims.
The company has posted annual losses going back to 2007. It also said in August that it expects that streak of losses to continue, citing pending litigation and possible regulatory action.
MGIC said in the filing with the Securities and Exchange Commission that interest payments on the debt are due twice a year. It has the option to defer payment for up to ten years without putting it into default.
The company delayed interest payments twice in 2009 and once in 2010. It has been current on its interest payments since Oct. 1, 2010.
SHARE ACTION: Shares of the company fell 10 cents, or 5.5 percent, to $1.65 by early afternoon. Its shares have traded between 66 cents and $5.15 in the past 52 weeks.