Die another day

25 March 2011 By Agnes Crane

That’s small consolation to Warburg Pincus, which pumped in funds as the crisis torpedoed the whole industry. If MBIA, with claims possibly climbing over $20 bln, can fend off a lawsuit by banks challenging its split, there might be hope for the investment but not the business.

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MBIA was given permission by the New York State Insurance Department in 2009 to split its insurance business in two so it could ringfence $5 billion of municipal bond assets from claims on its structured finance business. A group of banks including Morgan Stanley , Bank of America and the Royal Bank of Scotland are fighting that decision in court.

Warburg Pincus, the private equity firm, bought $500 million of MBIA common shares in December 2007 for $31 apiece and two months later acquired $300 million at $12.15 apiece. At the end of last year, the firm owned 23 percent of MBIA.

BlackRock Solutions, using December 2008 valuations, estimated that MBIA's losses on its structured product guarantees could range from $13.8 billion to $20.8 billion, according to a court filing.
(The second paragraph of this item has been corrected to make clear the $88 billion figure refers to structured financial products, not just mortgages.)

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