MBIA Inc. (NYSE:MBI) has lowered its exposure to commercial mortgage-backed securities by $3 billion after reaching a deal with Nomura Holdings, Inc. (ADR) (NYSE:NMR). MBIA will pay Nomura $325 million now and possibly another $83 million later (depending on the outcome of some other legal disputes) to commute the insurance policies on $3 billion in CMBS with underlying collateral originally given an A rating.

While MBIA still has $760 million of insurance exposure to CMBS with BB-rated underlying assets, it has established resources against the $391 million in expected losses and commuting such a large portion of its CMBS exposure leaves the company much stronger going forward.

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MBIA sold claims against ResCap to fund Nomura deal

Mark Palmer of BTIG Research saw this coming as the best explanation of MBIA Inc. (NYSE:MBI)’s decision to sell its claims against ResCap in December.

“It is our understanding that MBI sold its claims against Rescap in December not because it was compelled to do so by the New York State Department of Financial Services, but rather because it chose to do so. Combined with the fact that MBIA Insurance Corp.’s line of credit from Bank of America Corp (NYSE:BAC) only had about $20 million more drawn in December than it had outstanding as of September 30, it appears that the need for incremental liquidity to meet claims payments had not driven the decision,” he writes. It now seems that the sale was meant to free up cash for commuting the insurance policies with Nomura Holdings, Inc. (ADR) (NYSE:NMR) as Palmer predicted.

MBIA’s bond insurance unit looking at a credit upgrade

“We believe MBI shares have stagnated of late largely because of concerns about its insured exposure to Puerto Rico – National had approximately $5.1bn in exposure to various tranches of the Commonwealth’s debt as of September 30 – but also due to worries that S&P would hold off on a rating upgrade of National,” writes Palmer.

MBIA Inc. (NYSE:MBI) has argued that its municipal bond insurance unit National Public Finance Guarantee Corp should be upgraded from A to AA, and S&P has said that a public bond issue won’t affect their decision on National, which points to a likely upgrade in the near future. And even if an issuance is an unofficial gating item, a general obligation bond issuance is currently in the works.