MBIA Shares Rise After JPMorgan, Barclays Drop Suit Over Insuran

MBIA Shares Rise After JPMorgan, Barclays Drop Suit Over Insurance Split

By Christine Richard - Dec 29, 2010 2:20 PM PT

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MBIA Inc. shares surged after JPMorgan Chase Bank NA and Barclay’s Bank Plc said they are withdrawing from a lawsuit over the company’s decision to split its insurance unit in two.

The bond insurer’s stock rose 8.8 percent to $10.36, the most in the Russell 1000 Index today and its biggest gain since Oct. 14.

In February 2009, the Armonk, New York-based debt insurer separated its municipal bond insurance business from its structured-finance guarantees, including those on mortgage- related securities that caused MBIA to lose its AAA credit ratings in 2008. In May 2009, Bank of America Corp., JPMorgan Chase, UBS AG and 15 of the world’s largest financial companies sued MBIA, saying that the split illegally cut their odds of getting paid on structured-finance policies.

The lawsuit will continue for the remaining plaintiffs, according to a filing today with the New York State Supreme Court in Manhattan.

Barclays declined to comment, said Erica Chase, a spokeswoman for the company in New York. Jennifer Zuccarelli, a spokeswoman for JPMorgan in New York, didn’t immediately return a call seeking comment. A call to Kevin Brown, a spokesman for MBIA, wasn’t immediately returned.

MBIA has said it plans to begin insuring municipal bonds again once the litigation over the split concludes. The company hasn’t insured the securities since losing its top rating.

Trading of bullish MBIA options soared to a record. Almost 82,000 calls to buy the stock changed hands, 30 times the four- week average and 10 times the number of puts to sell. Investors who have sold a stock short sometimes protect against losses by buying call options, which act as a hedge against losing money in the short sale.