It appears MBIA’s board did not have the appetite for a showdown with Sptizer and Dinallo over a breakup, which they threatened to implement whether the bond insurer dooperated or not.
It is going to be interesting to see how this goes down with Warburg Pincus, which made a huge bet on MBIA due to Dunton’s selling efforts, and under the assumption the guarantor was a single entity. Not that they have much say, of course.
From Bloomberg:
MBIA Inc. brought back former Chief Executive Officer Joseph Brown to run the company and will consider splitting in two after record losses on subprime debt prompted an 83 percent slump in the share price and put its AAA credit ratings in jeopardy.
Brown, 59, said in an interview today that the world’s largest bond insurer may separate its municipal business from guarantees on subprime-mortgage securities, which caused a net loss of $2.3 billion last quarter. Gary Dunton, who succeeded Brown as CEO in 2004 and has resisted pressure to restructure the Armonk, New York-based company, will leave, MBIA said.
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Break up under consideration… ok… and who gets left holding the bag?
So the Board of Directors replace the CEO with his predecessor.
…huh huh! And that’ll help their situation?
Collective hara-kiri could have been a good option too.
what happens to the stock price if there is a breakup?
This is slightly off-topic, but I’m not sure where to post this.
Nouriel Roubini has a post entitled The Coming Muni Bonds Default Crisis…and the Monoline Downgrade Saga….
He writes:
The conventional wisdom is that state and local government rarely default; thus, there is a viable business for monolines that insure only state and local government. We will argue in this article that such conventional wisdom – behind the current plans to split the monolines’ business in a “good” muni insurance component and a “bad” structured finance insurance component – may be wrong…
Unfortunately, the heart of his post is behind a registration firewall and I can’t read his arguments.