The good news is that MBIA (NYSE: MBI) saved its S&P "AAA" rating, meaning bonds it insures will not lose their value. A drop in the rating could have caused write-offs at banks that own paper covered by the bond insurer.
MBIA also announced yesterday that it will, sometime in the next five years, break its muni-bond insurance business from its structured finance operations, forming two companies. Structured finance bonds have lost much of their value because they include CDOs and mortgage securities.
The move may have helped save the company, but it comes with a huge cost. MBIA is eliminating its dividend to save $174 million a year. For investors taking advantage of the company's 10% yield, the news could hardly be worse.
MBIA may have bought itself some time, but it put the wood to shareholders to stay afloat.
Douglas A. McIntyre is an editor at 247wallst.com.
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