May 8 Following a cash settlement between MBIA
Inc and Bank of America, Standard & Poor's
Rating upgraded on Wednesday the financial strength ratings of
MBIA Insurance Corp and National Public Finance Guarantee.
The rating agency, which had slashed the two ratings into
junk in March, added that the BB financial strength rating of
National Public Finance can be upgraded further to A once
litigation is over.
"If a settlement is achieved, National's financial strength
rating would be 'A' with a stable outlook, reflecting its
stand-alone credit profile," the rating agency said in a
statement explaining that it had National Public Finance on
The financial strength rating on MBIA insurance Corp was
raised to B from CCC with a stable outlook.
On Monday Bank of America has agreed to pay $1.6 billion in
cash to MBIA Inc, settling long-standing litigation and
providing the insurer with much-needed cash in its current
MBIA had long been in the sleepy business of guaranteeing
municipal debt against default, but last decade it began
guaranteeing riskier structured bonds, such as repackaged
mortgage securities, in a bid to add revenue and profit.
That backfired as MBIA lost its top credit ratings and banks
sought to hold it liable for losses after the housing bubble
burst. To survive, MBIA won approval in 2009 to split into a
municipal bond insurer to underwrite new deals and a guarantor
of structured finance products that would handle old claims.
But 18 banks objected, saying it would leave MBIA insolvent
and unable to pay its mortgage-related claims. On Wednesday MBIA
agreed to pay Societe Generale, the last remaining of the 18
banks, $350 million to settle litigation over its restructuring.
"Our rating action on MBIA Corp reflects our view that
potential stress on the company's liquidity position has
lessened as a result of the announced settlement with Bank of
America," said S&P in its statement. The outlook on MBIA Corp is
MBIA Insurance bonds rose in response to Monday's
settlement. The 25-year MBIA 11.54 percent bond, maturing in
January 2033 rose on Wednesday to 78 cents to the
dollar from 26 cents to the dollar on Monday.