PMI Files for Chapter 11 Bankruptcy

The PMI Group Inc., Walnut Creek, Calif., has filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the District of Delaware.

The filing, which only covers the parent company and not any of its subsidiaries, was made after the Arizona Superior Court in Maricopa County refused to vacate an Interim Order directing full and exclusive control of the insurer filed by the state Department of Insurance on Oct. 20, against its primary underwriting units PMI Mortgage Insurance Co., and PMI Insurance Co., which previously lost waivers to write new policies.

At the time of the seizure, PMI said it was seeking to gain approval for PMI Mortgage Assurance Co. to serve as a platform to write new mortgage insurance nationwide while PMI Mortgage Insurance Co. operated in run-off. 

In a press release, PMI said the regulator's action in seeking the interim order was inconsistent with informal assurances that it had obtained from the Arizona Department of Insurance that no such action was likely in the near term and that PMI had until the end of 2011 to advance the PMAC transaction.

PMI added it believed that the PMAC transaction offered the prospect of significantly enhancing the value of the company and was potentially substantially more favorable to shareholders as opposed to liquidation, plus PMAC could have served as an important additional resource for the payment of claims.

"The company has concluded that the interim order and the prospect of the appointment of a receiver in respect of PMI Mortgage Insurance Co. make it impractical for the company to pursue the PMAC transaction at this time without bankruptcy protection," the press release said.

Because of the filing, $685 million of senior unsecured notes and approximately $51.5 million of junior subordinated unsecured notes have become due and payable, but the noteholders' ability to seek remedies and enforce their rights has been stayed as a result of the bankruptcy filing.

A PMI spokesman said the company had no further comment regarding the filing.