March 5 Mortgage insurer MGIC Investment Corp
said it would offer 135 million shares and $350 million
principal amount of convertible senior notes to boost its
The company said it intends to use net proceeds from the
offerings for general corporate purposes, increasing capital in
its insurance subsidiary Mortgage Guaranty Insurance Corporation
(MGIC), and improving liquidity by providing funds for debt
The company, which was the largest mortgage insurer in the
United States before the financial crisis, has been under the
scanner for its extremely high risk-to-capital ratio (RTC), a
key metric in the insurance business.
The preliminary risk-to-capital ratio at MGIC's combined
insurance operations was 47.8 to 1 as of Dec. 31. Mortgage
insurance regulators commonly allow for a maximum
risk-to-capital ratio of 25 to 1.
The company said on its post-earnings conference call last
month that it was evaluating a number of options to address the
high RTC ratio, including raising capital.
Rival Radian Group Inc recently said it raised $700
million through a sale of stock and bonds, prompting ratings
agency Moody's to upgrade the stock.
Barclays raised its target price on MGIC's stock on Tuesday
to $8 from $1 and said it expects the insurer to raise capital
without much trouble, given Radian's successful offering.
Goldman Sachs & Co will be the book-running manager for both
offerings, the company said in a statement.
Shares of MGIC were up marginally after the bell. They
closed at $5.34 on Tuesday on the New York Stock Exchange.