MBIA Scores Big Investment
"Deterioration in the underlying credit portfolios related to prime second-lien mortgages has further increased the risk profile and capital requirements for MBIA and several other players in the financial guaranty industry," Fitch said in a statement. "Fitch notes that [Mon]day's announcement by MBIA demonstrates a proactive step by management to augment its capital position in light of the deterioration in several asset classes within its insured portfolio."
Monoline insurers, which use their high credit rating to provide insurance on debt issued by corporations and municipalities, have experienced capital concerns because many moved away from the staid business of enhancing the credit rating of insuring government bonds and corporate debt to insuring esoteric mortgage-related securities such as collateralized debt obligations.
Under the terms of the MBIA agreement, Warburg will make an initial investment of $500 million in MBIA through the acquisition of 16.1 million shares of MBIA common stock at a price of $31 per share -- a 3% premium to the $30 closing price on Friday.
Warburg also will support a shareholder rights offering of up to $500 million that MBIA expects to undertake during the first quarter of 2008. In connection with the rights offering, Warburg will receive seven-year warrants to purchase 8.7 million shares of MBIA common stock at a price of $40 per share and "B" warrants, which, upon obtaining certain approvals, will become exercisable to purchase 7.4 million shares of MBIA shares at $40 per share.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
24/7 market commentary from Jim Cramer and 20+ veteran Wall Street gurus. Get access to the latest trading ideas on stocks, options, and ETFs as well as a real-time forum to see the pros exchanging their investment ideas.
- Jim Cramer + 20 Wall Street pros
- Intraday commentary & news
- Real-time trading forum
- Actionable trade ideas
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass + 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV