Now comes the hard part

31 January 2008

The bond insurer moved fast in recent months and raised $1.5bn in new capital. Its competitors missed that opportunity. But MBIA s $2.3bn loss puts it in the same boat as its rivals. Scraping together more capital now will be tough. And it s unclear how much it really needs.

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Bond insurer MBIA reported a $1.9bn net loss for 2007 on January 31. This was primarily due to an aftertax marktomarket loss of $2.3bn on its portfolio of financial instruments, mainly its insured credit derivatives portfolio.

MBIA also said it has closed its $500m equity investment by Warburg Pincus, priced at $31 per share. Warburg has agreed to underwrite another $500m rights offering.

An Oppenheimer analyst estimated this week that just three banks have nearly half Wall Street's exposure to the bond insurance sector, and suggested that makes an industrywide bailout of the bond insurers unlikely.

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