Thursday, April 30, 2009
MBIA Split Attacked
"Veteran investor Martin Whitman's Third Avenue Management LLC sued units of MBIA Inc., saying the bond insurer's decision to separate its busineses 'greatly harmed' Third Avenue as a bondholder. ... In a statement Monday night, MBIA Chief Executive Joseph 'Jay' Brown said: 'We appreciate Third Avenue's past support of MBIA and regret that they felt today's action was necessary.' He added that the insurer's split 'should not have been a surprise,' and believes the allegations in the complaint are without merit. ... In mid-February this year, MBIA split its municipal-bond guaranty business from its problematic exposures in an attempt to resart its business of writing new bond guarantees. The move left the original insurance unit with less capital and fewer financial resources to support guarantees on toxic securities, such as collateralized debt obligations backed by subprime mortgages", Serena Ng at the WSJ, 7 April 2009.
MBIA's maneuver is transparent, Whitman should win his case on summary judgment. See my 5 April 2009 post: http://skepticaltexascpa.blogspot.com/2009/04/mbia-aig-maybe-not.html.