MBIA Raises $1.1 Billion Via Common Stock Offering

Bond insurer MBIA Inc. said it has raised $1.1 billion through a common stock offering, increasing its claims-paying resources by as much as $3.2 billion in about two months.

However, rating agencies have indicated that their outlook on MBIA would not be altered by this announcement alone and would depend on how future events unfold.

MBIA, the nation's largest bond insurer, based in Armonk, N.Y., announced last week that it would attempt to raise $750 million through the offering. The firm said that it sold 94.6 million shares of its common stock at $12.15 per share.

Warburg Pincus, a private equity firm, purchased $300 million in common stock and had agreed to backstop the offering by purchasing up to $750 million of convertible participating preferred stock; however, MBIA did not use the backstop.

Warburg Pincus also did not exercise its right to purchase $300 million in convertible participating preferred stock, MBIA said.

MBIA has undertaken a variety of efforts recently to raise capital to ensure that all commitments to policyholders can be honored and to ease the concerns of rating agencies.

Previously, the bond insurer sold $500 million in common stock to Warburg Pincus, sold $1 billion in surplus notes, and gained $200 million to $500 million in additional net capital due to maturing insured transactions during the fourth quarter of 2007.

Gary C. Dunton, MBIA's chairman and CEO, said: "These accomplishments demonstrate our continued industry leadership position, and we are confident that we have the strength to honor all of our commitments to policyholders while, at the same time, enabling us to take advantage of new business opportunities as they arise."

When MBIA announced its latest stock offering last week, Thomas Abruzzo, managing director at Fitch Ratings, told NU Online that capital raised through the offering would not have as much of an affect on the rating agency's outlook as MBIA's future commitments would.

"I think our bigger concern is really what's going to happen in the future, particularly with respect to the CDO (collateralized debt obligations) book, and that continues to be our main focus. That's where the uncertainty lies," Mr. Abruzzo said.

A spokesperson for Standard & Poor's said that S&P is looking at all of the factors involved, and that MBIA's ability to raise the $1.1 billion through its latest offering is just one factor among many that the rating agency will consider going forward.

Moody's Investors Service, which has downgraded the ratings of bond insurers FGIC and XL Capital from "Aaa" to "A3," said in a statement that MBIA and bond insurer Ambac are "better positioned from a capitalization and business franchise perspective" than FGIC and XL Capital. The Moody's ratings for both MBIA and Ambac remain under review for possible downgrade.