MBIA moves to help stability in credit markets

MBIA Inc, the world's largest bond insurer, said it will stop guaranteeing asset-backed securities for six months and plans to split that business from its municipal bond unit, moves aimed at restoring stability in troubled credit markets.

The decision was announced after Standard & Poor's earlier on Monday said it would not cut the company's top-tier credit ratings, causing MBIA shares to rally 19.7 percent and prompting a broader stock market rally.

S&P said it had grown more confident that MBIA could raise capital after the insurer sold some $2.6 billion of debt and equity this year.

MBIA on Monday also eliminated its dividend.

Joseph "Jay" Brown, MBIA's new chief executive, said in a letter to shareholders that he suspended the writing of new structured finance business for about six months, while the company evaluates its options.

He also said he plans within a five-year period to separate the Armonk, New York-based company's municipal and structured finance businesses. Brown had told Reuters last week that he would like to have the units operate separately underneath the company's holding company.

Eliminating the dividend would save about $174 million a year, he said on Monday.

S&P

S&P said it was no longer reviewing MBIA's "AAA" rating for downgrade, but said the outlook was "negative" because of the size of potential losses relative to the insurer's capital.

Moody's Investors Service and Fitch are both still considering cutting the top ratings for MBIA Insurance Corp, the company's main operating unit.

S&P said the main unit at Ambac Financial Group Inc, MBIA's largest rival, may still lose its top ratings.

Source - Reuters

http://www.reuters.com/article/ousiv/idUSN2538468020080226