Nov 13 MBIA Inc shares declined after Bank of America Corp offered to buy some of its bonds, which could thwart the insurer's effort to change their terms and avoid what it has called a possible default.
MBIA shares fell 19 percent, or $1.60, to $6.81 on Tuesday. Bank of America shares fell 0.6 percent to $9.33.
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."
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."
MBIA, in a statement, characterized Bank of America's offer as an "outrageous attempt to improperly interfere" in the company's affairs.
Bank of America declined to comment beyond the statement.
Bank of America and MBIA are involved in a web of ongoing legal disputes. MBIA claims that Bank of America owes it billions over soured mortgages that it wants the bank to buy back, while Bank of America says the insurer owes it billions over certain credit default swap transactions.