MBIA Shares Popped: What You Need to Know

Although we don't believe in timing the market or panicking over market movements, we do like to keep an eye on big changes -- just in case they're material to our investing thesis.

What: Shares of bond insurer MBIA (NYSE: MBI  ) rallied as much as 22% as investors cheered a court ruling over the company's restructuring plan.

So what: In late December, the momentum started going in MBIA's direction in its quest to dismiss a lawsuit over its restructuring as both JPMorgan Chase (NYSE: JPM  ) and Barclays (NYSE: BCS  ) pulled out of the suit. The remaining group of banks -- which includes Bank of America (NYSE: BAC  ) , Citigroup (NYSE: C  ) , and UBS (NYSE: UBS  ) , among others -- was handed a big setback today when a New York state appeals court rendered a split decision that dismissed the banks' action.

Now what: The ruling is good news for MBIA because it will allow the company to move forward with its restructuring efforts. The hope is that by having a separate public-finance insurance business (National Public Finance Guarantee Corp.), MBIA will be able to improve its ratings and get back to writing meaningful new business. Of course, while today's dismissal puts MBIA in a very good position, the banks could still appeal the decision. In addition, the banks still have an outstanding suit under Article 78 of New York's Civil Practice Law and Rules, seeking to nullify the approval letter that MBIA received from the New York State Insurance Department that gave the green light for the company's restructuring. There's definitely reason for MBIA shareholders to breathe a sigh of relief today, but they will still want to keep on the alert for the full resolution of the banks' challenge.

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