Hope for the bond insurers?
No sooner had Jonathan Weil at Bloomberg suggested MBIA’s AAA rating was about as squeaky clean and innocent as one Britney Spears, than the bond insurer unveiled a potential rating-saving raft of emergency capital from Warburg Pincus.
The breaking news was that the private equity house is to inject $1bn into MBIA, in the form of warrants to buy 8.7m shares at $40 each, and a straight out sale of 16.1m shares at $31 each.
Warburg Pincus will also gain the right to nominate two directors to the MBIA board.
Ms. Spears, the Mousketeers await.
It’s not quite clear yet though whether the injection will be enough to reinvigorate MBIA and help it keep its AAA rating (without which, the insurer would almost certainly collapse, sending ripples throughout the global bond markets).
And of course, the thrust of Weil’s argument should still stand. MBIA hasn’t been AAA for a while now. And bailouts from private equity firms – life saving or not – do not a top-rated company make.
What now for Ambac?