MBIA has fallen out of the S&P500, which means that many index fund managers and mutual fund managers will no longer have to hold shares of MBIA to match returns. As such, they may sell many of their shares, creating excess supply and hurting its share price.
MBIA Inc.'s five-level downgrade by Moody's Investors Service ( June 19th )probably will force it to make $7.4 billion of payments and collateral postings.
MBIA has $15.2 billion of assets available to satisfy the requirements, the company said yesterday in a statement. That includes $4 billion in cash and short-term investments, $1 billion of unpledged collateral and $10.2 billion of other securities, MBIA said.
The company issued the statement in response to questions it received after Moody's yesterday reduced MBIA's insurance financial strength rating to A2 from Aaa. The company's stock dropped 13 percent Thursday after the downgrade on concern that the Armonk, New York-based company would be forced to pledge assets.
In its report downgrading the debt, Moody's said MBIA faced payments and collateral calls triggered by the reduction. MBIA this month decided against giving $900 million to its insurance unit.