NEW YORK (AP) - Shares of bond insurer MBIA Inc. plummeted in Thursday morning trading after the company detailed its exposure to the troubled credit markets.
MBIA shares fell $7.43, or 27.9 percent, to $19.49 in morning trading. Earlier in the session, shares hit a 52-week low of $18.84.
MBIA said its total exposure to bonds backed by mortgages and collateralized debt obligations is about $30.61 billion. Included in that exposure is a pool of about $8.14 billion in CDOs backed by a combination of other CDOs and mortgages, which some analysts consider the riskiest part of an investment portfolio.
CDOs are complex financial instruments that combine slices of assets and other debt. The value of the mortgage-backed bonds and CDOs has been declining rapidly in recent months as the underlying debt has increasingly defaulted. Many CDOs and mortgage bonds are backed by subprime mortgages, given to customers with poor credit history, which have been among the worst-performing loans.
Morgan Stanley analyst Ken Zerbe said the size of MBIA's exposure was surprising and riskier than he previously thought. Zerbe recommends avoiding investing in all bond insurers until they can accurately assess the final size and scope of their mortgage and CDO losses.
On Wednesday, Standard & Poor's affirmed its 'AAA' rating on MBIA but placed the company on a negative outlook. A negative outlook means the company has a one in three chance of being downgraded in the next two years.
Shares of MBIA had traded between $24.62 and $76.02 during the past year.
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