MBIA spins off municipal bond insurance unit as National Public Finance Guarantee

February 18, 2009 by · 1 Comment
Filed under: Stock Market News 

This is good news for the muni’s space.  This action should have not needed to be taken by MBIA not getting into giving AAA ratings to shady sub-prime mortgage-backed securities.  At this point, it is best to take a wait and see approach to see if these types of moves, bring investor confidence to the space.


MBIA Inc, the world’s largest bond insurer, is separating its municipal bond unit into a new operation as it looks to rebuild a business shattered by the subprime mortgage crisis.

The plan met with a mixed reaction on Wednesday. Because the unit could win new business for MBIA, shareholders cheered the move and sent the company’s shares up 33 percent in mid-day trading.

But rating agency Standard & Poor’s downgraded the company’s main insurance unit to three steps above junk and rated the new unit “AA minus,” citing “uncertain business prospects.”

The new unit, National Public Finance Guarantee Corp, launches in an increasingly difficult period in the world of municipal finance. Cities and states are struggling with lower tax receipts as property markets, and the overall economy, crater, and are issuing fewer muni bonds.

Concern about issuers would typically boost demand for bond insurance, but investors are also concerned about the stability of the insurers.

Still, MBIA Chief Executive Jay Brown told Reuters he is confident that National Public Finance will win business and improve its ratings over time.

“We think the U.S. muni market is here forever, and we will do this at our own pace,” Brown said. The unit will look to raise capital, but will not rush, he added.

MBIA lost its top credit ratings last year after a disastrous foray into guaranteeing repackaged debt instruments triggered massive paper losses and large payouts for the insurer.

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One Response to “MBIA spins off municipal bond insurance unit as National Public Finance Guarantee”
  1. E.J. HART says:

    Please note that it should be ‘should have’ not ‘should of’ ‘ since it is a verb that
    is being used. I wouldn’t use a company that couldn’t speak properly in case
    they didn’t do other things properly. Hope this helps.

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