MBIA says could fund termination payments
NEW YORK (Reuters) - Bond insurer MBIA (MBI.N) said on Monday it would have enough resources to fund potential termination payments related to investment contracts if rating agencies downgraded the notes of its subsidiary MBIA Insurance Corp.
The largest U.S. bond insurer said it currently has $18.1 billion in outstanding liabilities related to its Asset/Liability Management (ALM) portfolio, including $11.2 billion in Guaranteed Investment Contracts.
Up to $7.9 billion of those securities could be terminated if MBIA Insurance Corporation's ratings were downgraded to BAA1 or BBB plus or below by Moody's Investors Service or Standard & Poor's, said MBIA.
It said it would currently need up to $3.4 billion in cash to fund potential termination payments under the GICs resulting from a downgrade to A3 by Moody's or A- by S&P, and up to an additional $4.5 billion for potential termination payments resulting from a downgrade to Baa1, BBB plus or below.
It said it would currently need up to $3.4 billion in cash to fund potential termination payments under the GICs.
"MBIA has approximately $8.1 billion in cash and government securities in its ALM portfolio to satisfy these requirements," said the bond insurer. "No additional collateral is required to be posted by a downgrade below MBIA's current ratings".
Bond insurers have been battered since last year by their exposure to complex securities backed by mortgages and other debt, raising concerns that losses could wipe out capital for policyholders, including holders of policies on municipal debt.
MBIA Insurance Corp is rated A2 by Moody's Investors Service on review for possible downgrade and AA by Standard & Poor's Ratings Services with a negative outlook.
(Reporting by Juan Lagorio, editing by Gerald E. McCormick)
