MBI says they have to make the change to avoid liquidation:
MBIA last week proposed changing some bond terms to eliminate the risk that it might be considered in default if a troubled insurance unit were put into rehabilitation or liquidation by the New York State Department of Financial Services.
The company at the time said if there were such a default it would have "insufficient liquidity" to make good on the notes, and "would likely immediately pursue other alternatives" including a possible "company bankruptcy."
BAC says if the proposed changes are made it will increase the likelihood of liquidation:
Bank of America in a statement said it believes if MBIA is successful in making the proposed change the risk of MBIA's insurance "being placed in rehabilitation or liquidation will increase, which would jeopardize all policyholder claims, including Bank of America's claims under these transactions."