Brown, named CEO yesterday stated that MBIA, the world's largest bond insurer, may split its guarantee business into two or raise more capital as regulators press the company to shield municipalities from sub-prime mortgage-related losses. Ambac Financial Group Inc., the second-largest, said yesterday that it isn't planning a similar move.
"We're prepared to be responsive this week,'' Brown, 59, said in an interview yesterday. "If we have to raise more capital, we will do it.''
MBIA's decision may come at the expense of ratings on $240 billion of asset-backed debt, sparking losses at banks and securities firms that hold the bonds. New York Insurance Superintendent Eric Dinallo has been pushing for a restructuring of MBIA and the rest of the industry after more than $8 billion of losses on sub-prime-mortgage securities put the AAA ratings of municipal debt in jeopardy.
"The message along these lines is: act, act soon, or be acted upon,'' Bank of America analysts including Michael Barry said yesterday in a report.
MBIA, down 83 percent in the past 12 months, fell 13 cents to $11.57 in Frankfurt trading at 10:50 a.m. New York-based Ambac, down 89 percent in a year, dropped 11 cents to $9.83.
"There are so many moving parts here,'' said Brian Yelvington, a strategist at independent fixed-income research firm CreditSights Inc. in New York. "The market hates uncertainty.''
MBIA ousted Dunton, 52, after he spent the past three months rebuffing critics who said the company may face more losses on sub-prime mortgage securities. MBIA Chief Financial Officer Chuck Chaplin told a congressional hearing last week that the company didn't need to raise more capital and had no need for more oversight.
Brown, who was CEO from 1999 to 2004, said he already began talks with Dinallo. MBIA has raised $2.5 billion since November. Moody's Investors Service, which has Aaa ratings on MBIA's insurance arm, said last week that it plans to complete a review of the rankings by the end of the month.