XL Capital's Chairman Gets a Margin Call [wsj 10.15.08]
By BRETT PHILBIN and DONNA KARDOS
The chairman of XL Capital Ltd. said he was forced to sell 80% of his stock in the Bermuda insurance company last week to meet a margin call, one of the latest cases of a top executive getting squeezed by the recent market rout.
The disclosure Tuesday came as the company reported it likely lost more than $1.6 billion in the third quarter, most of that the result of a costly disentanglement from troubled bond insurer Syncora Holdings Ltd., formerly Security Capital Assurance Ltd. XL Capital's shares soared, however, as the company said it wouldn't need to raise fresh capital, an exercise that typically comes at the expense of ordinary shareholders.
XL Capital Chairman Brian O'Hara couldn't enjoy the full benefits of the rally. He had used his holdings in XL as collateral for purchases of more XL stock when options he held were expiring.
The stock's plunge last week forced him to dump 643,374 shares Oct. 9 to meet a margin call -- a request that he post more collateral or reduce his borrowings. The sale, at $4.14 a share, brought in $2.7 million, according to a securities filing. That same stake would have been worth more than $7 million Tuesday.
The company didn't return calls seeking comment.
A number of insurers have seen their stocks pummeled in the past three weeks amid concerns about their exposure to plunging stock and debt markets. XL Capital Chief Executive Michael McGavick reassured investors, however, when he said on a conference call Tuesday that the company is "capitalized particularly well relative to the requirements of our rating agencies." In addition, Mr. McGavick said he expects market conditions in the fourth quarter to be "less prone to significant catastrophe."
Investors' main concerns have been the health of XL Capital's business model and whether there is a need for more capital, Sandler O'Neill analyst Paul Newsome said. "The answer appears to be, their business is intact," Mr. Newsome said.
XL Capital shares rose $4.11, or 55%, to $11.54 in New York Stock Exchange trading. |
