July 16, 2012 / 6:24 PM / 5 years ago

UPDATE 1-MBIA unit gets OK to make interest payment

* Shares rise

July 16 (Reuters) - Bond insurer MBIA Inc on Monday said New York regulators approved an interest payment on certain notes, ending days of uncertainty that had caused a sharp drop in the stock.

In a filing with the U.S. Securities and Exchange Commission, MBIA said state regulators gave MBIA Insurance Corp the go-ahead to make scheduled payments on a series of surplus notes due 2033.

Last Tuesday the company said it had not yet received regulatory approval to make those payments, sending shares down more than 10 percent.

The company, battered by losses on insured mortgage-backed securities, previously split its business into two: a municipal guarantee business and a structured finance unit.

Banks later sued the company, contending that the split was intended to defraud policyholders by leaving the MBIA Insurance unit undercapitalized and siphoning $5 billion from that unit at their expense.

MBIA shares rose 1.6 percent to $10.58 in afternoon trading.

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