By Karen Freifeld
NEW YORK, May 8 (Reuters) - MBIA Inc agreed to pay Societe Generale $350 million to settle litigation over the bond insurer’s restructuring, a person familiar with the case told Reuters on Wednesday.
MBIA confirmed the settlement in a regulatory filing Wednesday, which said the agreement brings to an end all litigation brought against it by 18 financial institutions.
Societe General was the last remaining bank out of those financial institutions, which originally challenged MBIA’s 2009 split between the bond insurer’s structured finance unit and its municipal bond business. The banks claimed the move harmed them as policyholders.
Bank of America Corp on Monday agreed to pay $1.6 billion in cash to MBIA Inc and receive the right to buy a 4.9 percent stake in the bond insurer to resolve long-running litigation between the two companies.
MBIA’s structured finance unit could have been forced into liquidation or rehabilitation had the Bank of America case continued, the insurer said on Feb. 27.
The settlement marked Bank of America Chief Executive Brian Moynihan’s latest step to settle wide-ranging lawsuits related to the financial crisis.
In March, MBIA won dismissal of one case by Bank of America and Societe Generale after a New York judge ruled that the state insurance superintendent at the time, was not “arbitrary and capricious” in authorizing the split.
The banks, which appealed the decision, said the restructuring left the MBIA Insurance unit undercapitalized and siphoned $5 billion from the unit to benefit another entity, National Public Finance Guarantee Corp, at their expense.
MBIA shares closed up more than 7 percent, at $15.48.