MBIA raises $1 billion
MBIA Inc., the world’s biggest bond insurer, raised $1 billion, more than initially planned, in a public offering of common stock designed to help preserve its AAA rating.
The offering came about after Fitch Ratings placed the company’s insurance ranking under review for a downgrade amid rising losses on the type of sub-prime mortgage debt that MBIA has guaranteed.
The offering brings to $2.5 billion the amount MBIA has raised since November.
The extra funds may not be enough to avert a downgrade because rating companies are increasing the amount of capital they demand that bond insurers set aside, Bank of America analysts said in a note to clients Thursday.
The insurer said it sold 82.3 million shares to the public late Thursday for $12.15 apiece, 14% less than MBIA’s closing price Thursday of $14.20 a share. In after-hours trading but still before the announcement of the offering price, MBIA shares slumped $1.19, or 8.4%, to $13.01.
MBIA increased the sale from a planned $750 million but accepted a lower price than it had anticipated.
The price matches the price Warburg Pincus had agreed to pay to “backstop” the planned $750-million transaction in case no buyers could be found. The backstop won’t be used.
The private equity firm is buying $300 million of common stock via the offering but isn’t exercising its right to purchase $300 million in preferred stock.
In other moves to raise capital, MBIA sold $500 million of MBIA stock Jan. 31 for $31 a share. The insurer also sold $1 billion in surplus notes and cut its dividend by 62%.
