PMI in Arizona Files Chapter 11

Arizona-based mortgage insurer The PMI Group Inc. (NYSE: PMI) has filed for voluntary relief under chapter 11 of the United States Bankruptcy Code in the U. S. Bankruptcy Court for the District of Delaware.

The filing is a result of the previously-announced seizure by the director of the Arizona Department of Insurance of the company’s primary regulated subsidiaries on Oct. 20, according to PMI.

The company intends to use bankruptcy protection to assess its options for preserving stakeholder value in light of the actions taken by ADI , the company said. None of the company’s subsidiaries commenced chapter 11 proceedings.

The company will continue to operate in the ordinary course of business as “debtor-in-possession” under the jurisdiction of the bankruptcy court.

At the time of the actions by ADI , PMI was exploring “strategic alternatives to maximize the value of the Company to its stakeholders,” the company stated.

The process included discussions with the ADI and policyholders toward the stabilization and orderly run-off of PMI Mortgage Insurance Co. “in a manner designed to maximize claims-paying resources and protect policyholder interests,” the company stated.

The company was seeking to raise additional capital from new investors in a transaction to enable PMI Mortgage Assurance Co., a wholly-owned subsidiary of MIC, to serve as a platform to write new mortgage insurance nationwide. To company and its advisors had been in discussions with potential investors in PMAC and with Fannie Mae and Freddie Mac, and the Federal Housing Finance Agency with respect to the designation of PMAC as an eligible mortgage issuer by the GSEs.

The ADI Director also is seeking the appointment of a receiver. A hearing on the matter has been set for Jan. 10.

In connection with the bankruptcy filing, the company’s $685 million of senior unsecured notes and roughly $51.5 million of junior subordinated unsecured notes have become due and payable. The noteholders’ ability to seek remedies and enforce their respective rights under the indentures applicable to the notes has been stayed as a result of the bankruptcy filing. The noteholders’ rights of enforcement are subject to the applicable provisions of the bankruptcy code.