MBIA shares rise after averting default on bonds

Mon Nov 26, 2012 10:12am EST

Nov 26 (Reuters) - MBIA Inc shares rose nearly 9 percent on Monday after the bond insurer said it had changed the terms of some of its debt to avoid what it called a possible default.

The company proposed the changes on Nov. 7 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.

MBIA said at the time that if there were such a default, it would have insufficient liquidity to make good on the notes and would probably immediately pursue other actions, including bankruptcy.

Bank of America Corp, which is tangled in legal disputes with MBIA, offered on Nov. 13 to buy some of the insurer's bonds to thwart the changes to the terms. At the time, the offer sent MBIA shares down more than 19 percent.

Bank of America said it believed the changes would increase the risk of MBIA's insurance unit "being placed in rehabilitation or liquidation will increase." That would jeopardize all policyholder claims, including Bank of America's, it added.

Bank of America was not immediately available for comment on Monday.

In their ongoing legal disputes, MBIA claims that Bank of America owes it billions of dollars 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.

Shares of MBIA were up 8.6 percent at $9.08 in morning trading, while Bank of America fell 0.6 percent to $9.84.