MBIA's shares traded higher last week on the announcement of Warburg Pincus' infusion of up to $1 billion of additional capital into the monoline insurer. MBIA sought the new capital to maintain its triple-A rating and to cushion loss expectations on its RMBS portfolio.
Warburg Pincus will inject $1.0 billion of capital via new equity. The global private equity firm will buy 16.1 million shares at $31 per share to raise an initial $500 million of new equity, with a no-sale period of three years. An additional $500 million will come from a rights issue underwritten by Warburg Pincus that is scheduled for next year. MBIA will also receive 8.7 million warrants at $40 per unit and have the right to appoint two directors to the board.