MBIA Shares Jump as Davis Ups Stake

Last week, Fitch Ratings slapped a rating warning on the company over concerns about its significant exposure to risky asset-backed commercial paper. MBIA said last week that it has $8.1 billion worth of structured products called CDOs-squared, among some $30.6 billion in total exposure to CDOs. That means MBIA guarantees payment on CDOs that package up other CDOs. Many are filled with subprime or other mortgage-backed debt, which has been subject to downgrades, deterioration in value and defaults of late.

Fitch said MBIA needed to shore up $1 billion in capital in the next four to six weeks to avoid a downgrade. That's on top of the $1 billion investment from the private-equity firm Warburg Pincus that MBIA secured earlier this month.

The rating agency followed up by making the same warning to MBIA rival Ambac(ABK Quote) on Friday.

Shares of MBIA, which have lost more than two-thirds of its value this year, soared as high as $22.67 Wednesday but more recently were up $1.73 to $21.85. Ambac jumped more than 13% but more recently was up 9% to $29.08.