Analysts See MGIC Capital Raise as Positive

MGIC Investment Corp. has priced the sale of 65.1 million shares of its common stock at $10.75 per share, for gross proceeds of approximately $700 million. The Milwaukee-based company also priced a $300 million offering of 5% convertible senior notes. Goldman Sachs & Co. is the sole book-running manager for both offerings. A report by FBR Capital Markets analysts Steve Stelmach and Amy DeBone commented, "We generally view the capital raise as a positive as it will bolster capital ratios and should remove liquidity risk at the holding company. Nonetheless, it does limit the potential upside in shares had MGIC been able to manage the current crisis and reach a point where it could have harvested future premiums on the existing book without the added share count." They added the new funds would allow MGIC to write more business and to withstand expected losses. FBR said it expected $700 million to be allocated to writing new business, giving MGIC $900 million for this purpose when adding in the $200 million set aside to write business at MGIC Indemnity Corp. As of midday on Wednesday, MGIC's common stock was trading at $11.58 per share, up $0.52 from the previous close.