The $7.4 billion Members United Corporate FCU found a way around accounting rules that prevent investors from recovering bond losses once they are written down as OTTI: sell it rather than hold it to maturity.
According to August financial reports posted online Sept. 22, Members United recorded a $7.5 million profit on a Syncora Guaranty-insured bond that had been previously been written down to a book value of zero after the monoline insurer had suspended claims payments earlier this year. When SGI announced it would resume making claims payments in July, the value of the bond jumped from zero to $7.5 million.
"SGI's financial condition remains weak and uncertain, therefore, a decision was made to accept the offer and lock in $7.5 million of value," said the corporate.
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