Bank of America Corporation (BAC.N: Quote) has agreed to pay $ 160 million in cash MBIA (MBI.N) will receive bought a 4.9% stake in the bond insurance company to resolve the long-running litigation rights said on Monday that .
Bank of America (Bank of America) will transfer $ $ 13.7 billion of MBIA senior debt acquired in December, and $ 500 million line of credit as part of the transaction, MBIA.
The agreement will resolve the dispute of the two companies, to include MBIA liability swap counterparty with Bank of America. Bank of America (Bank of America) will need to sue the previously announced first-quarter earnings, its capital ratio will rise in accordance with the Basel III processing results.
MBIA's shares rose as much as 57% of messages. Closing share price rose 45%, $ 14.29, while Bank of America shares closed up 5.2% at $ 12.88.
The settlement marks the latest step of the United States CEO Brian Moynihan, to solve a wide range of financial crisis-related litigation, and to alleviate the fears of investors, MBIA may face claims of BIS banks.
MBIA Chief Executive Officer Jay Brown said in a statement called the deal "an important milestone" company, which is in the process of restructuring and risk running out of money within a few months, it does not address the Bank of America disputes.
Who has represented clients mortgage Axinn, partner of Veltrop Hakelaide, the person said: "I think Bank of America (Bank of America) is able to apply some pressure, and the fact that the extraction MBIA, appears to be on the verge of some clear leverage, Lawyer Don Hawthorne backed securities litigation.
"It may be a good deal all around," he added, "reflect MBIA was generated strong case, Bank of America (Bank of America) have a strong negotiating position."
MBIA has long been sleepy business has been in municipal debt default, but the past decade, it began to bid to increase revenue and profits, protection of high-risk structured bonds, such as re-packaging of mortgage-backed securities.
It did not, MBIA lost its top credit rating of the bank seeks to hold real estate bubble burst responsible for any loss. Short sellers, such as hedge fund manager William Ackerman MBIA lack of funds, including the loss of structured finance.
In order to survive, MBIA approved in 2009 from the New York insurance regulators, now part of the country's financial services division, split into municipal bond insurance company underwriting new offers and guarantor of structured finance products, will deal with the old claims .
But the opposition of the 18 banks, saying it would leave MBIA insolvent, unable to pay its mortgage-related claims.
Checkout on Monday as the only bank still in this case, the Industrial Bank (SOGN.PA). A spokesman did not immediately respond to requests for comment.
Avoiding liquidation
New York's financial services manager, Benjamin Lawsky said in a statement, reached after a year of bargaining agreements. He called it "a very positive step for the Bank of America and MBIA."
Came together after the transaction, MBIA company's board of directors hired the Blackstone Group (BX.N) as a consultant, familiar people, who are not authorized to publicly discuss the matter. Blackstone Group spokesman did not immediately respond to requests to comment on their role.
MBIA's structured finance department may have been forced liquidation or rehabilitation of the case, the Bank of America continued, the insurer said Feb. 27. Brown said, a month, there is a "significant risk" regulatory procedures.
In 2011, the municipal bond guarantee business loan of U.S. $ 110 million U.S. dollars, structured finance unit funds denominated bonds to buy, debt, and grow to $ 17 billion over time. But the company's regulatory authorities refused to allow the structured finance unit borrowed.
MBIA will use the proceeds of the transaction, Bank of America to repay the loan of $ 1.6 billion, which stood on May 2, following from a single solution Flagstar Bancorp Inc. the (FBC.N) payment of $ 110 million.
More legal difficulties
As part of the agreement, Bank of America (Bank of America) will receive warrants to purchase 9,940,000 shares of MBIA, or about 4.9% of the outstanding shares, the price per share of $ 9.59. The warrants can be exercised at any time before May 2018.
Some investors believe that the equity of the Bank of America (Bank of America) as a sign of confidence in the future of MBIA.
Bank of America (Bank of America) will take charges of $ 150 million, or 10 cents per diluted share, the settlement of tax, sliced ??its previously announced earnings per share. Accounting standards take against the first-quarter earnings, because it has not yet submitted the Form 10-Q report, Bank of America (Bank of America) said.
The Tier 1 capital ratio of the bank in accordance with the Basel III standards will rise by 10 basis points to 9.52%, to reduce MBIA swaps was canceled to reflect the risk-weighted assets. Tangible book value per ordinary share will drop 10 cents to $ 13.36.
MBIA transactions only solution to the crisis era litigation has reached the the latest clearing bank in the United States.
Last month, banks and investors who claimed they were misled national units to buy high-risk mortgage debt reached $ 500 billion dollar settlement. The second largest bank in the United States still faces on behalf of Fannie Mae (Fannie Mae) and Freddie Mac (Freddie Mac) (FMCC.OB) by the U.S. Federal Housing Finance Agency's lawsuit, the insurance company American International Group (FNMA.OB) ( AIG.N).
Bank of America (Bank of America) are also awaiting court approval with Countrywide mortgage-backed securities investors reached $ 850 million worth of transactions. The hearing is scheduled to begin on May 30.
On Friday, New York and Delaware Attorney General to give up their opposition transactions. American International Group (AIG) and other parties remain opposed.
"Bank of America Chief Financial Officer Bruce Thompson said:" I do not think anyone will ever declare victory at this point, in a conference call last month. "We are a very meaningful way of this pipeline project."
The MBIA settlement bank of the Dow Jones News first reported.
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