Moody's Says BofA's (BAC) Move to Block Consent Solicitation is 'Credit Negative' for MBIA (MBI)

November 19, 2012 1:56 PM EST
On November 7, 2012, MBIA Inc. (NYSE: MBI) announced the commencement of a consent solicitation to amend the Indentures governing its 6.40% Senior Notes due 2022, 7.00% Debentures due 2025, 7.15% Debentures due 2027, 6.625% Debentures due 2028 and 5.70% Senior Notes due 2034. The announcement and the Consent Solicitation Statement are included as Exhibits 99.2 and 99.3, respectively, to MBIA’s Current Report on Form 8-K filed on November 7, 2012. The Consent Solicitation expires at 5:00 p.m., New York City Time, on November 21, 2012, unless extended.

On November 19, 2012, Moody’s Investors Services, Inc. issued an “Issuer Comment” indicating that the commencement of the tender offer by Bank of America Corporation (NYSE: BAC) on November 13, 2012 to purchase any and all of the 5.70% Senior Notes due 2034 with the express purpose of inducing holders of the 2004 Notes to sell their 2004 Notes to BOA rather than consent to the proposed amendments being sought as part of the consent solicitation “is credit negative for MBIA” because if BOA is successful in blocking the Consent Solicitation it will leave MBIA and its subsidiaries exposed to the risk of an event of default under the Indentures caused by a rehabilitation or liquidation proceeding involving MBIA Insurance Corporation, as described in the Consent Solicitation Statement under “Background and Certain Significant Considerations––Benefits to Holders of the Proposed Amendments”, and because the Tender Offer may mean that it is less likely that MBIA will reach “a quick settlement under terms favorable to MBIA” of its disputes and insurance policies with BOA and its subsidiaries described in the Consent Solicitation Statement under “Background and Certain Significant Considerations––Risks of an MBIA Corp. Rehabilitation or Liquidation Proceeding that would Trigger a Subsidiary Insolvency Default.”

In connection with the Consent Solicitation, MBIA is hereby disclosing that it has been advised by Moody’s that Moody’s expects to convene a meeting of its ratings committee in the near future to consider the ratings of MBIA, MBIA Corp. and National Public Finance Guarantee Corporation in light of recent developments, including the Tender Offer, and that the Committee may lower the ratings of one or more of the these entities. There can be no assurance that Moody’s will have a meeting of its ratings committee, that Moody’s will announce the results of its meeting, or of the ratings action, if any, that Moody’s will take with respect to the ratings of such entities.

MBIA, MBIA Corp. and National are currently rated B2 / Negative outlook, B3 /Review for a possible downgrade and Baa2 /Negative outlook, respectively, by Moody’s.

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