Amended Agreement is Structured to Preserve Value of Net Operating Losses
MILWAUKEE, July 7 /PRNewswire-FirstCall/ -- MGIC Investment Corporation (NYSE: MTG) today announced that it has amended and restated the company's shareholder rights agreement originally adopted in 1999. The amended rights agreement has a 5% ownership trigger to help preserve the value of federal income tax net operating losses ('NOLs') that the company is incurring in 2009 and expects to incur thereafter. The amendment also extends the agreement's term to August 17, 2012 from July 22, 2009 and decreases the current exercise price of the rights to $25 per full common share.
Section 382 of the Internal Revenue Code generally allows a company to use NOLs to offset future taxable income and therefore reduce federal income tax obligations. However, the company's ability to use its NOLs would be limited if there was an 'ownership change' under Section 382. An ownership change would occur if shareholders viewed under Section 382 as owning 5% or more of the company's stock increase their collective ownership by more than 50 percentage points over a defined period of time. The amended rights agreement discourages those shareholders from making certain purchases of stock that could cause an 'ownership change' to occur, which potentially could have an adverse impact on NOL carryovers and other shareholders.
Effective at 5:00 p.m. Central Time on July 7, 2009, if any person and its affiliates collectively becomes the beneficial owner of 5% or more of the outstanding shares of company common stock, there would be a triggering event causing significant dilution in the voting power and economic interests of such person and its affiliates. The amended rights agreement generally defines beneficial ownership in a manner consistent with the existing rights agreement. The amended agreement also provides that a person beneficially owns any stock that it would be deemed to own under Section 382 and related regulations.
Existing shareholders who immediately before 5 p.m. Central Time on July 7, 2009 beneficially own 5% or more of the outstanding shares will trigger a dilutive event only if they increase their percentage ownership of the stock, other than an increase resulting from the company's repurchase of its shares.
