MBIA set to weather downgrade

Bond ratings agency MBIA Inc. said it has “sufficient” cash and government securities to fund potential termination payments related to guaranteed insurance contracts even if the notes issued by its MBIA Insurance Corp. unit are downgraded by one of the major credit ratings agencies. The Armonk, N.Y.-based company currently holds $18.1 billion in outstanding liabilities related to its asset/liability management business, of which $11.2 billion are guaranteed investment contracts. Up to $7.9 billion of the GIC portfolio can be terminated if MBIA Insurance is downgraded to Baa1 or below, or BBB+ or below. The remaining $10.2 billion in ALM liabilities comprises medium-term notes issued by MBIA Global Funding LLC. MBIA would currently need up to $3.4 billion in cash to fund potential termination payments under the GICs. "During the past three months, we've worked to minimize the consequences to MBIA resulting from any changes in rating opinions," Clifford Corso, MBIA chief investment officer, said in a statement. "As a result of these efforts, we are well-positioned to meet our future obligations on time and in full irrespective of any downgrade."