MBIA, the world's largest bond insurer, slashed its common stock dividend 62percent on Wednesday as part of a plan to strengthen capital and preserve the "triple-A" credit ratings it depends on to operate normally.
The company also announced plans to sell $1 billion of debt maturing in 2033 and said it expects to incur $737 million of losses in the fourth quarter, largely for securities it insured that are comprised of prime residential home equity loans and lines of credit.
Shares of MBIA rose nearly 11 percent to $15.47 in pre-market trade from Tuesday's composite close of $13.98. The gain came after credit rating agency Fitch Ratings said it expects to affirm MBIA's "triple-A" insurer financial strength rating, with a "stable" outlook, if the company sells the $1 billion of debt. Fitch threatened a downgrade last month.
MBIA cut its quarterly dividend to 13 cents per share from 34 cents in a bid to save $80 million a year.
The lowered dividend "significantly enhances our financial flexibility" despite "volatility in the mortgage market," Chief Financial Officer C. Edward Chaplin said in a statement.
MBIA, based in Armonk, New York, said that once it completes its capital management plan, it expects to meet or exceed the requirements for "triple-A" ratings from credit rating agencies.
Last month, MBIA said private equity firm Warburg Pincus LLC agreed to invest $500 million in MBIA common stock and receive warrants to buy additional shares.
Fitch and larger rival Standard & Poor's on Wednesday rated the new MBIA debt "AA," their third-highest grade.