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MBIA Inc. in a bid to retain its AAA credit rating and protect its municipal bond insurance business from potential structured finance insurance losses has announced plans to restructure its business as well as halt quarterly dividend payments and suspend the writing of new structured finance insurance.
"As soon as it's feasible but within a five-year period, we will restructure the company in such a way as to insure public and structured finance business from separate operating entities," stated Jay Brown, MBIA's chairman and chief executive officer, in a "letter to owners" released after market close Monday. In order to preserve its capital and enhance operating flexibility, the company has decided to pay dividends on an annual, rather than quarterly basis, Brown said. This move is expected to save MBIA $174 million annually. The suspension of new structured finance business is planned for a six-month period, Brown stated. Brown did not forget to mention his favorite short selling activist, Pershing Square Capital Management LP's William Ackman, who last week proposed a split book plan that would involve directing dividends from the municipal bond business toward the struggling structured finance side. He said that while he shares some of Ackman's "passionate" beliefs and persistence, the two men have one difference: "Mr. Ackman's objective is less complex; he will stop at nothing to increase his already enormous potential profits as he systematically tries to destroy our franchise and our industry," the letter said. MBIA's moves follow news Monday that Standard & Poor's has reaffirmed its and its rival Ambac Financial Group Inc.'s AAA rating. Ambac according to media reports is expected Tuesday to announce restructuring plans, which could involve a $3 billion recapitalization. Additional coverage will come later in The Daily Deal and on TheDeal.com. - Michael Rudnick See letter to owners from MBIA Categories Deal Video
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