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Why Shares of MBIA Inc Jumped Nearly 15%

By Jordan Wathen - Sep 2, 2015 at 3:26PM

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MBIA shares are jumping as investors get a better idea of its potential losses from insurance sold on Puerto Rico's municipal bonds.

What: Shares of MBIA Inc (MBI 2.19%) traded higher by nearly 15% after the market open and are now higher by about 12%.

So what: MBIA is getting a bid today thanks to an agreement between Puerto Rico's Electric Power Authority and some of its bondholders.

The agreement will result in a roughly 15% haircut for investors and replace some of the company's outstanding debt with lower-interest notes. The agreement is expected to save the utility about $700 million in principal and interest over the next five years, according to Bloomberg.

MBIA has insured a number of Puerto Rican municipal bonds; among these, PREPA bonds are its second-largest single exposure. The bond insurance company broke out its exposures in its quarterly filings, showing that it had insured roughly $2.1 billion in PREPA bonds and nearly $10 billion in Puerto Rican municipal bonds in total.


Debt Service Outstanding (millions)

Sales Tax Financing Corporation


Electric Power Authority


Commonwealth General Obligation


Highway and Transportation Authority Transportation Revenue


All others




Source: Page 70 of MBIA's quarterly report.

Now what: Importantly, this is one of the first agreements between Puerto Rico and its bondholders, and only 35% of the bonds were represented in the agreement. Future agreements may result in larger haircuts to principal amounts or interest rates. But, at least for now, MBIA shareholders can breathe a little easier, having at least some idea of what the eventual losses might look like.


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