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MBIA Lives to Fight Another Day



November 26, 2012 – Comments (0) | RELATED TICKERS: MBI , BAC

MBIA (NYSE: MBI) is continuing to limp along, now getting the debt-term changes it was hoping for and Bank of America (NYSE: BAC) was vehemently fighting against. What is this big change? Essentially it lifts the provision that if MBIA Corp. (which did all the nasty structured-bond insuring) went into rehab or liquidation that the entire company would be considered in default. Instead, the healthier public-finance insurance arm is now on the hook for that.

How did MBIA get its bondholders to agree? Well partly it was bribe-esque: It gave $10 on each $1,000 in principal value for those bond holders that consented. 

Why does B of A hate this so much? Well, this allows more leeway for MBIA (parent) to allow MBIA Corp to head into the cold clutches of rehab or liquidation. B of A maintains that MBIA Corp owes it billions on insurance claims and if it ends up in the hands of New York State Department of Financial Services, it would be much harder for BAC to get what it thinks it's owed. This is hardly a one-way battle though as MBIA maintains that BAC needs to buy back a truckload of soured mortgages.

In Reuters' coverage MBIA's spokesman had some advice for Bank of America in soothing its concerns over MBIA's ability to pay out insurance claims:

"Bank of America, he added, could reduce the uncertainty about MBIA's ability to pay claims by honoring obligations to buy back mortgages." 

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