NEW YORK MBIA Inc (MBI.N) said that Bill
Ackman's estimate that the bond insurer faces more than $11
billion of potential losses is based on faulty assumptions, and
is clearly intended to help Ackman's bet that the company's
shares will drop.
MBIA said in a letter to regulators dated February 11 and
made public on Thursday that the model and data Ackman used to
determine MBIA's losses appear to "have some major
deficiencies," including its use of 1,267 randomly selected
securities to estimate losses. MBIA instead uses a loan-by-loan
Bill Ackman, founder of hedge fund Pershing Square Capital
Management, has been vocal about his short position in MBIA for
In a letter sent at the end of January, Ackman suggested to
regulators that MBIA and other bond insurers should not be
allowed to shift funds from their regulated insurance units to
their holding companies.
Ackman said that those dividends from the operating unit to
the parent company would unfairly shift funds to investors that
could pay off policyholders.
MBIA said in its letter that if the bond insurers' holding
companies were deprived of cash flow, their ratings would fall,
and their operating units' ratings would fall as well.
"Mr. Ackman purports an interest in 'Saving the Bond
Insurers,' but his cynically self-serving proposals offer no
such salvation," MBIA said.
MBIA said in written testimony obtained by Reuters on
Wednesday that lawmakers and regulators should curtail
short-sellers beating down its stock, which has fallen more
than 80 percent since the start of 2007.
(Reporting by Dan Wilchins; Editing by Brian Moss)