A group of hedge funds yesterday sued MBIA Inc., claiming its restructuring and transfer of $5.4 billion of capital to a new domestic public finance insurer strands the holders of MBIA Insurance Corp. policies on securities other than municipal bonds "in a denuded insurer that will be unable to meet its obligations as they come due."

The investors are Aurelius Capital Master Ltd., Aurelius Capital Partners LP, Fir Tree Value Master Fund LP, Fir Tree Capital Opportunity Master Fund LP, and Fir Tree Mortgage Opportunity Master Fund LP. They filed suit in U.S. District Court in Manhattan and are seeking class action status.

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