By Shannon D. Harrington - Nov 10, 2011 6:39 AM GMT+0700
MBIA Inc. (MBI), the bond insurer that was shut out of the business of backing municipal debt because of soured bets on home loans and commercial-mortgage securities, said it agreed to terminate $10.6 billion of trades since the end of September.
The wagers, largely tied to commercial real estate, brings to $23 billion the amount of guarantees on collateralized-debt obligations that the company has ended this year, the Armonk, New York-based insurer said in a statement today. Of that sum, MBIA terminated $8.5 billion in the third quarter, it said.
The company didn’t disclose the cost to end the trades. The amounts paid or expected to be paid “continue to be consistent with our loss reserves,” Chief Financial Officer Chuck Chaplin said in the statement. Kevin Brown, a spokesman for MBIA, declined to comment further.
“These actions help stabilize MBIA Corp.,” Chaplin said in the statement. The trades terminated or in the process of being torn up this year “is greater than the amount commuted in all of 2010,” he said.
The cost to protect against a default by the MBIA unit that sold the guarantees fell.
Credit-default swaps on MBIA Insurance Corp. declined 2 percentage points following the statement to a mid-price of 40 percent upfront as of 4:39 p.m. in New York, according to broker Phoenix Partners Group. That means it would cost $4 million initially and $500,000 annually to protect $10 million of obligations for five years.
To contact the reporter on this story: Shannon D. Harrington in New York at sharrington6@bloomberg.net
To contact the editor responsible for this story: Pierre Paulden at ppaulden@bloomberg.net
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