MBIA Inc. (NYSE: MBI) (the Company) today announced that it has,
together with its subsidiaries MBIA Insurance Corporation (MBIA Corp.)
and National Public Finance Guarantee Corporation (National), agreed to
the terms of a comprehensive settlement agreement and related agreements
(the Settlement Agreement) with Bank of America Corporation and certain
of its subsidiaries (Bank of America). Under the terms of the Settlement
Agreement, MBIA Corp. will receive a net payment of approximately $1.7
billion, consisting of approximately $1.6 billion in cash and $137
million principal amount of MBIA Inc.’s 5.70% Senior Notes due 2034. In
exchange for the $1.7 billion net payment, MBIA Corp. will dismiss the
litigation commenced in September 2008 against Countrywide Home Loans,
Inc. (Countrywide), among other parties, and later amended to include
claims against Bank of America, relating to breaches of representations
and warranties on certain MBIA-insured securitizations sponsored by
Countrywide. Bank of America and MBIA have also agreed to the
commutation of all of the MBIA Corp. policies held by Bank of America,
which have a notional insured amount of approximately $7.4 billion, and
of which $6.1 billion are policies insuring credit default swaps held by
Bank of America referencing commercial real estate exposures. MBIA Corp.
will have no further payment obligations under the commuted policies.
The Settlement 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 herein.
“We are very pleased to have reached a comprehensive settlement
agreement with Bank of America that improves the outlook for MBIA
Insurance Corp. and sets the stage for National to reclaim its
leadership position in the U.S. public finance insurance market,” said
Jay Brown, MBIA CEO. “I appreciate Bank of America’s efforts to arrive
at a fair agreement that resolves a number of legacy issues for both
institutions as well as the assistance provided by Superintendent Lawsky
and the New York State Department of Financial Services. While work
remains to be done, today’s announcement represents a significant
milestone in MBIA’s Transformation for the future and toward our goal of
resuming growth in shareholder value.”
Under the terms of the Settlement Agreement, Bank of America will
receive five-year warrants to purchase 9.94 million shares of MBIA
common stock at a price of $9.59 per share. Bank of America also agreed
to dismiss its claims in the pending litigation concerning the
restructuring transactions announced by MBIA on February 18, 2009 (the
Transformation) and the pending litigation between the parties
concerning the senior debt Consent Solicitation completed by MBIA in the
fourth quarter of 2012. In addition, Bank of America agreed to withdraw
the purported “notice of default” it sent in connection with the Consent
Solicitation.
MBIA Corp.’s policies insuring the residential mortgage-backed
securities (RMBS) transactions originated by Countrywide will continue
to be in full force and effect, and MBIA Corp. will continue to make
timely payment of principal and interest when due under these policies.
Bank of America will have no further put-back liability to MBIA with
respect to the insured Countrywide transactions.
In addition, MBIA Corp. has entered into a $500 million three-year
secured revolving credit agreement with Bank of America, which MBIA
Corp. may use for general corporate purposes. Borrowings under the
agreement will be secured by a pledge of the collateral that secured the
National loan to MBIA Corp. and by MBIA Corp.’s equity interest in its
wholly-owned subsidiary, MBIA UK (Holdings) Limited.
The payment from Bank of America, including the MBIA Inc. bonds, will be
used to repay the remaining outstanding balance and accrued interest on
MBIA Corp.’s secured loan from National in accordance with its terms.
The secured loan balance of approximately $1.7 billion as of April 1,
2013 had been reduced to approximately $1.6 billion as a result of the
receipt of $110 million on May 2, 2013 in settlement of representation
and warranty related litigation with Flagstar Bank.
The value of the settlement is consistent with amounts recorded to MBIA
Corp.’s statutory balance sheet at year-end 2012. However, the
settlement substantially improved its liquidity and capital risk profile
by eliminating potentially substantial near-term payment obligations and
$7.4 billion of insured exposure, providing funds for the repayment of
the secured loan from National and making a $500 million secured loan
facility available for general corporate purposes.
The Blackstone Group served as financial advisor to the Company in
connection with the settlement.
The Company expects that it will announce the date and time of its first
quarter 2013 financial results conference call shortly. The call had
been tentatively scheduled for Thursday, May 9 at 8:00 AM, but will not
take place at that time.
Forward-Looking Statements
The information contained in this press release should be read in
conjunction with our filings made with the Securities and Exchange
Commission. This release includes statements that are not historical or
current facts and are “forward-looking statements” made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act
of 1995. The words “believe,” “anticipate,” “project,” “plan,” “expect,”
“intend,” “will likely result,” “looking forward” or “will continue,”
and similar expressions identify forward-looking statements. These
statements are subject to certain risks and uncertainties that could
cause actual results to differ materially from historical earnings and
those presently anticipated or projected, including, among other risks
and uncertainties, whether the Company will realize, or will be delayed
in realizing, insurance loss recoveries expected in disputes with
sellers/servicers of RMBS transactions at the levels recorded in its
financial statements, the possibility that the Company will experience
severe losses or liquidity needs due to increased deterioration in its
insurance portfolios and in particular, due to the performance of CDOs
including multi-sector, CMBS and CRE CDOs and RMBS, the failure to
obtain regulatory approval to implement our risk reduction and liquidity
strategies, the possibility that loss reserve estimates are not adequate
to cover potential claims, the risk that MBIA Insurance Corporation will
be placed in a rehabilitation or liquidation proceeding by the NYSDFS,
the Company’s ability to access capital and the Company’s exposure to
significant fluctuations in liquidity and asset values within the global
credit markets, in particular in the ALM business, the Company’s ability
to fully implement its strategic plan, including its ability to achieve
high stable ratings for National or any other insurance subsidiaries,
and the Company’s ability to commute certain of its insured exposures,
including as a result of limited available liquidity, the Company’s
ability to favorably resolve litigation claims against the Company, and
changes in general economic and competitive conditions. These and other
factors that could affect financial performance or could cause actual
results to differ materially from estimates contained in or underlying
the Company’s forward-looking statements are discussed under the “Risk
Factors” section in MBIA Inc.’s most recent Annual Report on Form 10-K
and Quarterly Report on Form 10-Q, which may be updated or amended in
the Company’s subsequent filings with the Securities and Exchange
Commission. The Company cautions readers not to place undue reliance on
any such forward-looking statements, which speak only to their
respective dates. The Company undertakes no obligation to publicly
correct or update any forward-looking statement if it later becomes
aware that such result is not likely to be achieved.
MBIA Inc., headquartered in Armonk, New York is a holding company whose
subsidiaries provide financial guarantee insurance, as well as related
reinsurance, advisory and portfolio services, for the public and
structured finance markets, and asset management advisory services. The
Company services its clients around the globe with offices in New York,
Denver, San Francisco, Paris, London, Madrid and Mexico City. Please
visit MBIA's website at www.mbia.com.
