By Rick Rothacker
Nov 26 MBIA Inc on Monday said it had
changed the terms of some of its debt to avoid what it called a
Its shares rose more than 5 percent. The bond insurer
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
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. That would jeopardize all policyholder claims,
including Bank of America's, it added.
In a statement on Monday, Bank of America questioned MBIA's
use of its own cash to help win bondholder approval for the
change in terms. MBIA said it paid $10 for each $1,000 in
principal that gave its consent and repurchased $170 million in
debt from holders that had consented.
"MBIA is using its resources to buy back its own bonds to
gain consent, instead of honoring its obligations to its
policyholders," the bank said in a statement.
The bank said it will continue to pursue all of its options
"to protect our interests as a policyholder and attempt to
ensure that MBIA fulfills its financial obligations to all
policyholders," including "billions of dollars" the bank
believes it is owed under MBIA insurance policies.
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. Bank of America says the insurer
owes it billions over certain credit default swap transactions.
MBIA spokesman Kevin Brown said the company's repurchase of
debt was paid for with holding company resources and did not
impact policyholders. Bank of America, he added, could reduce
the uncertainty about MBIA's ability to pay claims by honoring
obligations to buy back mortgages.
Shares of MBIA closed up 5.7 percent at $8.84. Bank of
America fell 0.5 percent to $9.85.