MBIA Inc., the largest bond insurer, will split its municipal bond insurance business from the mortgage-related debt guarantees that led to the loss of its top credit ratings. The shares surged as much as 42 percent, Bloomberg reported.
Armonk, New York-based MBIA transferred guarantees on about $537 billion of municipal bonds to MBIA Insurance Corp. of Illinois, which it plans to rename National Public Finance Guarantee Corp. The new unit will be separate from an existing one that guarantees complex mortgage-linked securities and other debt, which plunged in value during the U.S. housing and credit crises, prompting a 92 percent drop in the company's shares since October 2007 and the ouster of its chief executive a year ago.
MBIA is seeking to revive its core business after guarantees on complex mortgage-backed securities and other debt saddled it with potential losses as U.S. home foreclosures soared and the market for the securities froze. The loss of its AAA ratings last year crippled its ability to write new muni-bond insurance, creating an opportunity for rivals to take market share.
"It's a positive but it's a small positive," said Robert Haines, an analyst at CreditSights Inc. in New York. "We're going to need to see further steps and the further steps are much more challenging than the step they took today."
MBIA also said today it has had discussions with the U.S. Treasury about additional capital, which it will need to win back its top ratings, suggesting the company may seek funds from the government's Troubled Asset Relief Program.
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