MBIA to get $1 billion boost from Warburg Pincus; equity firm to also backstop rights offering

By Lisa Kerner

Charlotte, N.C., Dec. 10 - Warburg Pincus agreed to commit up to $1 billion to MBIA Inc. through a direct purchase of MBIA common stock and a backstop for a shareholder rights offering.

MBIA is the holding company for MBIA Insurance Corp.

The agreement calls for Warburg Pincus to initially invest $500 million through the acquisition of 16.1 million shares of MBIA common stock priced at $31 per share.

Following the stock purchase, Warburg Pincus will backstop a shareholder rights offering of up to $500 million that the company said it plans to undertake during the first quarter of 2008.

Warburg will receive warrants to purchase 8.7 million shares of MBIA common stock at a price of $40 per share and B warrants to purchase 7.4 million shares at $40 each. The term of the warrants is seven years.

As part of the agreement, MBIA will increase its board by two members to a total of 13 members, with Warburg Pincus having the right to nominate two directors.

MBIA's senior management team committed to investing a total of $2 million in the company's common stock at the same price as Warburg.

"As we have stated previously, we have been evaluating various alternatives to further strengthen our capital position, particularly in light of the rating agencies' pending reviews of residential mortgage-backed securities and collateralized debt obligations transactions that we have insured," MBIA chairman and chief executive officer Gary Dunton said in a company news release.

"We believe this investment by Warburg Pincus represents an ideal outcome as it not only provides additional capital, but also allows us to join forces with a growth-oriented, long-term investor that understands the business model and shares our vision for growing our business profitably," Dunton added.

Armonk, N.Y.-based MBIA provides financial guarantee insurance, investment management services and other services to public finance and structured finance clients.

Warburg Pincus is a private equity investor.

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