April 11 Hedge fund Aurelius Capital and bond
insurer MBIA Inc have settled a lawsuit filed by
Aurelius in March 2009, according to a stipulation filed on
Wednesday in the Manhattan federal court.
Aurelius alleged that MBIA's decision to split its municipal
insurance business from its structured finance unit breached the
insurer's covenant of good faith and fair dealing with its
policyholders. The structured finance unit had suffered huge
losses from the mortgage crisis.
The Aurelius lawsuit claimed dividing MBIA's businesses left
"some $241 billion of policyholders stranded in a denuded
insurer that will be unable to meet its obligations as they come
MBIA's restructuring was approved by the New York state
Insurance Department in 2009. Bank of America Corp and
two other banks are suing MBIA and the Insurance Department over
the restructuring in New York state court.
The case is Aurelius Capital Master, Ltd., et al v. MBIA
Inc., et al., U.S. District Court for the Southern District of
New York, No. 09-02242.