MBIA Inc., parent of MBIA Insurance Corp., will get up to a $1 billion capital injection from private equity firm Warburg Pincus, executives of the world’s largest bond insurer said in a statement. Warburg Pincus will first invest $500 million by acquiring MBIA common shares at a 3% premium over MBIA’s closing price of $30 a share on Dec. 7. A second investment of up to $500 million will be made in the first quarter of 2008 through issuance of shares and warrants. MBIA CEO Gary Dunton said in the statement that the need to “further strengthen our capital position” was related in large part to “the rating agencies’ pending reviews of residential mortgage-backed securities and collateralized debt obligations transactions that we have insured.”
MBIA will also set aside up to $800 million in reserves against potential losses related to “the deteriorating performance of mortgage-backed securities, including prime home equity lines of credit.”
