Debt sale by MBIA may be delayed

A planned $1-billion debt sale by MBIA Inc. may be delayed until next week, investors familiar with the offering said Thursday, as investors demand greater concessions to help the world’s largest bond insurer shore up its capital and defend its rating.

The news came a day after MBIA slashed its dividend and said it would sell $1 billion of so-called surplus notes and buy reinsurance.

The moves are part of an effort to preserve capital and the triple-A ratings the bond insurer needs to operate normally.

The surplus note sale, which had been expected to price Thursday, has a fixed coupon of between 9% and 12%, nearly double what similarly rated bonds offer, according to investors who were briefed by dealers.

Surplus notes are bonds specific to the insurance industry, but they can be classified as equity by some state insurance regulators. That allows ratings companies to count some of the securities as equity, thereby bolstering the insurers’ balance sheets.

Pricing is not likely until next week, with investors haggling over increased protections, a source familiar with the deal said. The MBIA bond could carry a fixed coupon as high as 11% for five years, according to a second investor.

An MBIA spokeswoman declined to comment.

Also on Thursday, a filing showed that distressed-debt investor Martin Whitman had doubled his stake in MBIA to almost 11%.