MGIC, Radian Deal Collapses amid Market Turmoil.

MILWAUKEE -- The proposed merger of MGIC Investment Corp. here and Radian Group Inc., Philadelphia, has hit a serious snag as a result of the writedown in the value of C-BASS, a joint venture the two firms own a majority stake in.

Last month, the two companies mutually announced that the proposed merger is off. No money changed hands between the parties and the companies said they would drop all litigation related to the matter.

When the deal between the two mortgage insurers was first announced, they said they would need to sell a portion of the combined stakes in C-BASS and a second joint venture, Sherman.

But the trouble in the mortgage market forced both MGIC and Radian to say they would have to take an impairment against possibly their entire investment in C-BASS.

On Aug. 7, MGIC made its first public statement, which indicated the deal was in trouble. It said it informed the New York State Insurance Department that it was not obligated to complete the proposed merger with Radian because of the impairments both companies will take in regards to C-BASS. The decision was a result of a preliminary assessment conducted by MGIC's management.

The MGIC statement added that its management is "reviewing other developments that might affect MGIC's obligation to close. Whether MGIC will definitively conclude that it is not obligated to close the merger is a decision that will be made only by the board of directors of MGIC, which will not be asked to decide until MGIC's management has completed its analysis."

Radian, on the other hand, said it believes MGIC will have to live up to the merger agreement. It noted both firms own a 46% stake in C-BASS.