U.S. Markets closed

BofA says MBIA solicitation would increase risk of MBIA Insurance liquidation

Bank of America (BAC) said in connection with its tender offer for the outstanding 5.70% Senior Notes due 2034 issued by MBIA (MBI) that affiliates of Bank of America are party to certain credit default swap transactions for which MBIA Insurance, a subsidiary of MBIA, has provided credit support with a notional value of $6.15B, against which Bank of America said it has established credit valuation adjustments for a significant portion. Bank of America said it believes that "if the MBIA Consent Solicitation is successful, the risk of MBIA Insurance Corporation being placed in rehabilitation or liquidation will increase, which would jeopardize all policyholder claims, including Bank of America’s claims under these transactions." Note that on November 7, when MBIA announced its consent solicitation, it proposed to substitute one of its subsidiaries, National Public Finance Guarantee Corporation, for another subsidiary, MBIA Insurance Corporation, in the definitions of “Restricted Subsidiary” in its “1990 Indenture” and “Principal Subsidiaries” in its “2004 Indenture.” MBIA stated in the press release related to the consent solicitation that "the Company believes the proposed amendments will be beneficial to both the Company and its noteholders." Shares of MBIA continue to move lower in late afternoon trading, sliding $1.45, or 17.24%, to $6.96.