Bond insurer MBIA Inc. (MBI) slumped in Thursday's regular trading session after it disclosed information on its exposure to the CDO market. The additional information was mostly about the collateral composition of the company's CDO-squared transactions.The company said it had guaranteed $30.61 billion on bonds backed by mortgages and collateralized debt obligations or CDOs, which includes guarantees on $8.14 billion in CDO-squared transactions, or CDOs backed by other CDOs and mortgages. Of this, more than $5.1 billion of the insurance was written in 2006 and 2007 when risks of defaults were particularly high. CDO-squared transactions are typically leveraged single-tranche CDOs in which the underlying assets are CDO tranches or, more often, a mixed pool of CDO tranches and Asset-Backed Securities. The value of mortgage-backed bonds and CDOs have been declining in recent months on account of the increased default by underlying debts. Most of the CDOs and mortgage-backed bonds have been backed by subprime mortgages. MBIA said that the information provided on its website on December 19 provides details on the composition of its $30.6 billion Multi-Sector Collateralized Debt Obligation which had been previously provided in its Operating Supplement. The details do not disclose any additional CDO exposure. The company said it did not disclose the details earlier as many of the transactions contain less than 25% direct U.S. residential mortgage-backed security collateral. Standard & Poor's, Moody's and Fitch confirmed that the information was provided to them and was taken into consideration in the recent rating analyses, the company said. In addition, the information was made available to private equity firm Warburg Pincus prior to entering into the previously disclosed Investment Agreement. MBIA said that the agreement is not affected by the information. Fitch Ratings said on Thursday that it might lower its rating on MBIA from Triple-A if the company does not obtain more capital commitments or put in place reinsurance or other risk mitigation measures in the next four to six weeks. On Wednesday, Standard & Poor's Rating Agency affirmed its Triple-A rating on MBIA, but lowered its outlook for the company to Negative from Stable. MBIA said later on the same day that it supplemented the listing of its exposure to CDOs that include Residential Mortgage Backed Securities or RMBS as of September 30, 2007, to make it consistent with the CDOs that were included in S&P's analysis, and added that the listing was posted on its web site.Last week, Moody's Investors Services reviewed its rating on financial guaranty firms based on its evaluation of the US mortgage market stress and the companies' plans for strengthening capitalization and strategies. The agency reaffirmed its Triple-A rating of MBIA, but changed its outlook on the company to negative from stable, pending implementation of the commitment to invest $1 billion by Warburg Pincus previously announced and other elements of its total capital management plan. On December 10, MBIA announced that Warburg Pincus has agreed to invest up to $1 billion in the company to help increase its capital base and preserve its Triple-A rating. Under the agreement, Warburg Pincus will make an initial investment of $500 million in MBIA by acquiring 16.1 million shares of MBIA common stock for $31.00 per share. After that, Warburg Pincus will backstop a shareholder rights offering of up to $500 million during the first quarter of 2008.In exchange, Warburg will receive warrants to purchase 8.7 million shares of MBIA common stock at a price of $40 per share and B warrants, which, upon obtaining certain approvals, will become exercisable to purchase 7.4 million shares of common stock at a price of $40 per share. The term of the warrants is seven years. MBIA's senior management team has also committed to invest a total $2 million in the company's common stock at the same price as Warburg.MBIA is among some of the biggest U.S. financial institutions seeking investments from outside investors to shore up capital after the value of subprime mortgages and CDOs slumped.MBI closed Thursday's regular trading session at $19.95, down $7.07 or 26.17% on a volume of 52.32 million shares. In after-hours trading, the stock gained $2.15 or 10.78% to settle at $22.10.
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June 05, 2026 16:18 ET A busy week for economic news flow saw a slew of reports being released that reflected the trends in the U.S. labor market. In Europe, economic growth and inflation data gained attention as the European Central Bank and Bank of England head for policy session later in the month. In Asia, the monetary policy session of the Indian central bank was in focus as the country, a major oil importer, reels under the pressures of a weaker rupee and rising inflation.