WARBURG TAKES BATH ON MBIA STAKE

Warburg Pincus' $800 million investment in troubled monoline insurer MBIA is teaching private-equity firms and hedge funds alike a valuable lesson: Bottom fishing can be risky business.

What more than six months ago was greeted with applause on Wall Street is proving to be anything but praiseworthy for Warburg these days. According to its most recent quarterly performance report, which was obtained by The Post and covers the three months ended March 31, Warburg took a $215 million writedown on its MBIA stake.

That's a far cry from the total of $800 million that Warburg invested in MBIA in exchange for a 25 percent stake in the insurer, whose business it is to guarantee the performance of various debt securities, ranging from municipal bonds to esoteric instruments backed by mortgages.

The MBIA position accounts for the single-largest investment in Warburg's investment vehicle known as Warburg Pincus Private Equity X.

At the time that Warburg made its first investment in December, MBIA shares were trading at $30. Since then, a collapsing debt market and persistent questions about MBIA and its competitors' financial health have sent the sector reeling, with MBIA shares cratering nearly 90 percent.