Bank of America Announces Comprehensive Settlement With MBIA Inc.
Bank of America Corporation today announced a comprehensive settlement
with MBIA Inc. to resolve all outstanding representations and warranties
claims and all other claims between the parties. The agreement requires
certain approvals of the New York State Department of Financial
Services, which are expected to be received shortly, at which point the
parties will execute the agreements and promptly close all contemplated
transactions described below.
As part of the settlement, Bank of America will pay MBIA approximately
$1.6 billion in cash and remit to MBIA all of the outstanding MBIA 5.70%
Senior Notes due 2034 that Bank of America acquired through a tender
offer in December 2012. In addition, Bank of America will terminate all
of its outstanding credit default swap (CDS) protection agreements
purchased from MBIA on commercial mortgage-backed securities (CMBS), as
well as terminate certain other trades in order to close out positions
between the companies.
MBIA will issue to Bank of America warrants to purchase 9.94 million
shares of MBIA common stock, or approximately 4.9% of its currently
outstanding shares, at an exercise price of $9.59 per share. The
warrants may be exercised at any time prior to May 2018. Also, Bank of
America will provide a senior secured $500 million credit facility to
MBIA Insurance Corp.
Bank of America will record $1.6 billion in additional pretax charges in
the first quarter of 2013, of which $1.3 billion is related to the
settlement and the remainder is related to other monolines. The
after-tax effect of the additional charges will reduce the company's
first-quarter 2013 net income to $1.5 billion, or $0.10 per diluted
common share, from the $2.6 billion, or $0.20 per diluted common share
reported on April 17, 2013. As the settlement occurred prior to filing
the company's Quarterly Report on Form 10-Q for the period ended March
31, 2013, generally accepted accounting principles require Bank of
America to apply the additional charges to the financial results for the
quarter ended March 31, 2013.
The effect of these actions is expected to increase the company's
estimated Tier 1 common capital ratio under Basel 3 as of March 31, 2013
by 10 basis points to 9.52%1, reflecting the reduction in
risk-weighted assets associated with the terminated CDS contracts,
partially offset by the additional litigation expense. In addition, the
company's tangible book value per common share2 at March 31,
2013 is $13.36 per share, $0.10 per share less than reported on April
17, 2013.
These charges will be reflected in Bank of America's financial
statements to be included in the company's First Quarter 2013 Report on
Form 10-Q, which will be filed with the Securities and Exchange
Commission on or prior to May 10, 2013.
1 Basel 3 Tier 1 common capital ratio is a non-GAAP financial
measure. Basel 3 estimates reflect the company's current understanding
of the U.S. Basel 3 NPRs and assume all necessary regulatory model
approvals, except for the potential reduction to the risk-weighted
assets resulting from the Comprehensive Risk Measure after one year. The
Basel 1 Tier 1 common capital ratio at March 31, 2013 was 10.49%
including the Market Risk Final Rule, a decrease of 9 basis points from
the ratio reported on April 17, 2013.
2 Tangible book value per share of common stock is a non-GAAP
financial measures. We believe the use of this non-GAAP financial
measure provides additional clarity in assessing the results of the
Corporation. Other companies may define or calculate this non-GAAP
financial measure differently. Book value per share of common stock was
$20.19 per share at March 31, 2013.
Bank of America
Bank of America is one of the world's largest financial institutions,
serving individual consumers, small- and middle-market businesses and
large corporations with a full range of banking, investing, asset
management and other financial and risk management products and
services. We serve approximately 52 million consumer and small business
relationships with approximately 5,400 retail banking offices and
approximately 16,300 ATMs and award-winning online banking with 30
million active users. Bank of America is among the world's leading
wealth management companies and is a global leader in corporate and
investment banking and trading across a broad range of asset classes,
serving corporations, governments, institutions and individuals around
the world. Bank of America offers industry-leading support to
approximately 3 million small business owners through a suite of
innovative, easy-to-use online products and services. The company serves
clients through operations in more than 40 countries. Bank of America
Corporation stock (NYSE: BAC) is a component of the Dow Jones Industrial
Average and is listed on the New York Stock Exchange.
Forward-looking statements
Certain statements in this news release represent the current
expectations, plans or forecasts of Bank of America and are
forward-looking. Forward-looking statements can be identified by the
fact that they do not relate strictly to historical or current facts.
These statements often use words like “expects,” “anticipates,”
“believes,” “estimates,” “targets,” “intends,” “plans,” “predict,”
“goal” and other similar expressions or future or conditional verbs such
as “will,” “may,” “might,” “should,” “would” and “could.” The
forward-looking statements made in this press release include, without
limitation, statements concerning the settlement with MBIA, including
the expected timing and amounts of payments to be made thereunder;
expectations regarding the impact of the settlement and monoline reserve
adjustments on first-quarter 2013 net income and the estimated Tier 1
common capital ratio under Basel 3 as of March 31, 2013; expectations
regarding the claims to be extinguished by the settlement with MBIA and
the actions to be taken by the parties in furtherance thereof; and other
similar matters. Forward-looking statements speak only as of the date
they are made, and Bank of America undertakes no obligation to update
any forward-looking statement to reflect the impact of circumstances or
events that arise after the date the forward-looking statement was made.
These statements are not guarantees of future results or performance and
involve certain risks, uncertainties and assumptions that are difficult
to predict and are often beyond Bank of America's control. Actual
outcomes and results may differ materially from those expressed in, or
implied by, any of these forward-looking statements. You should not
place undue reliance on any forward-looking statement and should
consider the uncertainties and risks discussed under Item 1A. “Risk
Factors” of Bank of America's Annual Report on Form 10-K for the year
ended December 31, 2012 and in any of Bank of America's other subsequent
Securities and Exchange Commission filings.
Visit the Bank of America newsroom for more Bank
of America news.
www.bankofamerica.com
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