MBIA raises $1.1 billion as share sale closes
Bond insurer says it's confident it can honor commitments to policyholders
By Alistair Barr, MarketWatch
Last update: 6:31 p.m. EST Feb. 13, 2008
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SAN FRANCISCO (MarketWatch) -- MBIA Corp. said late Wednesday that it raised roughly $1.1 billion from selling new shares as the bond insurer tries to boost capital and keep its crucial AAA ratings.
MBIA shares climbed 2.8% to $11.96 during after-hours trading on Wednesday.
The company sold 94.6 million new common shares at $12.15 each for total net proceeds of roughly $1.1 billion. Private-equity firm Warburg Pincus, which has already invested at least $500 million in MBIA, bought $300 million of the new stock as part of the offering.
MBIA said it has increased its ability to pay claims by as much as $3.2 billion in about two months; raising $1.1 billion on Wednesday, $500 million selling stock to Warburg, $1 billion from a surplus notes offering and $200 million to $500 million from existing guarantees that expired during the fourth quarter.
"We have the strength to honor all of our commitments to policyholders," Chief Executive Gary Dunton said. The extra capital will also help the company pursue new business opportunities, he added in a statement.
Warburg had committed to provide a backstop for MBIA's latest offering by agreeing to buy up to $750 million of convertible participating preferred stock. But MBIA said on Wednesday that it didn't use the backstop and Warburg didn't exercise its right to purchase $300 million of the convertible securities.
Bond insurers like MBIA (MBI:MBIA Inc) have been hit hard by the mortgage crisis. There's concern the companies will suffer losses from guarantees they sold on complex securities known as collateralized debt obligations (CDOs), imperiling their AAA ratings. Without these top ratings, their business models may be undermined.
Bond insurers are trying to keep their AAA ratings by raising new capital. Regulators have also stepped in and are currently working with bond insurer counterparties on possible bailouts of specific companies in the business. Yesterday, Berkshire Hathaway run by Warren Buffett, offered its own solution. See full story. End of Story
Alistair Barr is a reporter for MarketWatch in San Francisco.
All posts are only my opinion and are not buy or sell recommendations.
