MBIA shares boosted by $1B investment

Shares of MBIA Inc. surged today after the bond insurer said that private equity firm Warburg Pincus would inject up to $1 billion of fresh capital into the struggling company, according to Crain's New York Business. The investment provides a much-needed reprieve for Armonk, N.Y.-based MBIA, which saw it shares plummet 17.8% last week after Moody’s Investors Services warned that mortgage-related losses could leave the company without enough capital to maintain its AAA credit rating. Under Monday’s arrangement, Warburg Pincus will buy $500 million of MBIA common stock at a price of $31 a share, which represents a 3% premium over the stock’s closing price on Dec. 7. The private-equity firm will also backstop a shareholder rights offering of up to $500 million next year. “We believe this investment … is a validation of the strength and integrity of our business,” MBIA Chief Executive Gary Dunton said in a statement, noting that MBIA will continue seeking additional ways to increase capital. Losing its AAA rating would be a veritable death sentence for MBIA, casting doubt over the ratings of $652 billion in state, municipal and structured finance bonds that the company guarantees. MBIA warned Monday that its mark-to-market losses for the fourth quarter would still be “significantly” higher than the third-quarter, due primarily to the plummeting value of its guaranteed securities. Despite future worries, investors cheered Monday’s news, sending shares of MBIA up as much as 27.3% to $38.19 in morning trading. Prior to Monday’s run-up, the stock has declined 59% from the start of the year. Other bond insurers also strode higher. Shares of Ambac, down 69.9% for the year, climbed as much as 20.3% to $32.28 Monday.