Warburg Pincus Boosts Ownership Stake in MBIA Inc. to Over 30%

Private equity firm Warburg Pincus LLC last week increased its stake in MBIA Inc. to 30.44% from 25%, it revealed in a Securities and Exchange Commission filing Friday.

The filing came just days after Warburg Pincus said it had increased its ownership to 25% from 20.2%. A spokesperson for the private equity firm said it declined to comment on the investment beyond its filing.

Warburg in December 2007 agreed to buy $500 million worth of MBIA stock at $31 per share. MBIA yesterday closed down 5.41% to $4.02.

Warburg's additional investment comes as MBIA faces pressure over its recent restructuring that separated its structured finance and public finance books. A group of hedge funds last week sued MBIA over the restructuring, while other financial counterparties last week met with officials from the New York Insurance Department to lodge complaints.

Under the restructuring, MBIA paid subsidiary MBIA Insurance Corp. of Illinois - which will serve as a muni-only insurer - $2.89 billion to take over its public finance book and capitalized it with an additional $2.09 billion. All other obligations remain at MBIA Insurance Corp.

Those with MBIA guarantees on structured finance products say the restructuring treats them unequally. In the lawsuit, the hedge funds said that the plan leaves them with guarantees from "a moribund and insolvent MBIA Insurance company left largely with guaranty exposures to toxic securities and instruments and no prospect of writing new business."

MBIA said when it announced the restructuring that it had the ability to play all claims as they come due. It has said "allegations in the complaint are without merit" and that the New York Insurance Department approved the transaction.

The company said it plans to defend itself against the lawsuit "vigorously."

"The complaint makes various broad-based and unsubstantiated allegations with regard to the transformation," MBIA said.

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