$1B infusion for troubled bond insurer MBIA

NEW YORK (CNNMoney.com) -- MBIA, the world's largest bond insurer, announced Monday that it will receive a $1 billion investment from private equity firm Warburg Pincus.

Shares of MBIA were briefly halted Monday morning ahead of the announcement. After resuming trading, the stock rose 23 percent to $37.12 a share. The stock has fallen more than 50 percent since January.

The company said last week that it was working on a plan to shore up its capital cushion to maintain its AAA rating.

Moody's Investors Service warned last week that MBIA is at greater risk of a "capital shortfall" than previously expected and could be downgraded.

Warburg Pincus will make an initial investment of $500 million in MBIA by purchasing 16.1 million shares of the company's common stock at $31 per share, a 3 percent premium on the stock's closing price on Friday.

The private equity firm will also backstop a shareholder rights offering of up to $500 million that MBIA (Charts) expects to undertake next year.

In other words, if the company proceeds with the offering as expected, the private equity firm has agreed to purchase the balance of any shares not sold as part of that offering.

"We believe this investment in our common stock by Warburg Pincus, one of the most respected and successful private equity firms, is a validation of the strength and integrity of our business," said Gary Dunton, MBIA's chairman and CEO, in a statement.

David Coulter, a Warburg Pincus executive, said in a prepared statement that the investment will allow MBIA to "withstand, but more importantly, take advantage of, the current volatile credit environment."