MBIA Raises More Funds than Previously Announced, Stock Expected to Drop
In an effort to protect its AAA insurance rating, the world's biggest bond insurer, MBIA raised $1 billion by selling shares at $12.15 each in an effort to protect its AAA insurance rating. As a result, shares of troubled bond insurer are expected to open lower today because of this dilution in the value of the stock held by its current shareholders.
The 82.3 million shares were sold at a 14 percent discount to Armonk, New York-based MBIA's $14.20 closing price, MBIA said today in a statement. Private equity firm Warburg Pincus LLC purchased $300 million shares of the common stock, MBIA reported..
MBIA increased the sale from a planned $750 million, though accepted a lower price than it had anticipated. The sale matches the price Warburg Pincus had agreed to pay to backstop the transaction in case no buyers could be found. The backstop won't be used and Warburg Pincus won't exercise its right to purchase $300 million in preferred shares, MBIA said.
MBIA's plans were announced after Fitch Ratings placed the company's AAA insurance ranking under review for a downgrade as losses increase on the type of subprime- mortgage debt that MBIA guarantees. MBIA has raised about $2.5 billion since November, and said it will contribute most of the proceeds to its insurance company.
Warburg Pincus already bought $500 million of stock this year. MBIA also sold $1 billion in surplus notes and cut its dividend by 62 percent. New York-based Warburg Pincus purchased 16.1 million shares at $31 each on Jan. 30.
Published on February 8, 2008
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