NEW YORK (Reuters) - Investors may snap up a planned $1 billion debt sale by a unit of MBIA Inc MBI.N, after the beleaguered bond insurer was forced to ramp up the deal's yield to about 14 percent to attract greater interest, according to investors familiar with the deal on Friday.

The issue of so-called surplus notes by MBIA Insurance Corp. is part of an effort by the bond insurer to buoy capital and preserve its “AAA” rating. Investors on Thursday said dealers were negotiating a coupon rate between 9 percent and 12 percent, or as much as double what similarly rated bonds offer.

“They had problems getting it done at the levels that were initially talked about,” said Mirko Mikelic, a portfolio manager at Fifth Third Asset Management in Grand Rapids, Michigan. “When they bumped it out to 14 percent, it got a lot of people out of the wood work.”

Shares of MBIA rose 18 percent to $16.67 on the New York Stock Exchange.

Initial market talk had the yields at 9 percent to 12 percent. The higher yield boosted investor interest, and the deal may price as early as Friday afternoon, said a person familiar with the offering.

Surplus notes, unique to insurers, can bolster MBIA’s balance sheet since they can be classified as equity.

Pricing on the issue, initially expected this week, is uncertain, said another investor, who declined to be named. Delayed pricing may be due to negotiations over protections demanded by some large investors against a five-year call feature, he said.

MBIA shares have plunged in the past year amid speculation the company does not have enough capital to cover losses on bonds it insures. The company this week said it guarantees $9 billion of some of the riskiest mortgage-related securities, versus $8.1 billion announced three weeks ago.

Investors also said the deal attracted more attention after a filing on Thursday showed that distressed debt investor Marty Whitman had doubled his stake in MBIA to almost 11 percent. Whitman is known for generating big returns on companies going through wrenching turnarounds.

Whitman’s Third Avenue Management LLC holds a 10.98 percent stake in MBIA, the investment fund said in a filing with the U.S. Securities and Exchange Commission.

An MBIA spokeswoman declined to comment.