MBIA CEO--Credit markets are wrong about company

NEW YORK, March 10 (Reuters) - Some credit traders are betting that MBIA Inc (MBI.N: Quote, Profile, Research) will default over the next year, but the company's chief executive said anyone believing the world's largest bond insurer is close to missing a payment on its own debt is wrong.

The cost of protecting MBIA debt against default for a year in the credit derivatives market has surged, though some spreads have declined since January as MBIA has raised more than $2.6 billion of capital and preserved the top ratings at its main insurance unit.

MBIA has just $80 million of interest payments due over the next year, and no scheduled principal repayments, compared with at least $500 million in cash to cover that obligation, Chief Executive Jay Brown said in a March 9 letter to shareholders.

The company has even more funds available considering lines of credit and other items, Brown wrote.

"I think even our most vocal critics will agree that $500 million-plus of cash should be enough to pay $80 million in holding company financial payments," Brown wrote.

MBIA does not have any principal payments pending on debt until 2010, when it has a $100 million obligation coming due, Brown wrote.

In fact, buying credit protection for one year costs much more per year than buying five-year protection, Brown wrote.

"Given our robust financial position at MBIA Inc, I would certainly argue that the existing spread in the short-term is illogical," Brown wrote.

Protecting MBIA obligations against default for one year cost about 1,690 basis points on Friday, or $1.69 million for every $10 million protected, according to Markit, which administers credit derivatives indexes. That's up from about 152 basis points at the end of July but down from a peak of 3,375 basis points on Jan. 21. (Reporting by Dan Wilchins, editing by Gerald E. McCormick)