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Bond insurer MBIA retains law firm as it looks to avoid takeover -source
April 27, 2013 / 1:17 AM / 5 years ago

Bond insurer MBIA retains law firm as it looks to avoid takeover -source

NEW YORK, April 26 (Reuters) - Bond insurer MBIA Inc is working with law firm Weil Gotshal & Manges as it seeks to avoid possible rehabilitation of its structured finance unit by a New York regulator, a source familiar with the matter said Friday.

The Armonk, New York-based company previously disclosed in its annual report in February that its structured finance unit could be forced into liquidation or rehabilitation.

The New York State Department of Financial Services, which regulates New York insurers, has the power to put MBIA into a process known as rehabilitation, by which it can take control of a regulated insurer if it does not have sufficient cash.

MBIA has worked with Weil in the past, another source familiar with the matter said.

The company, which was the largest bond insurer in the United States before the financial crisis, has faced litigation over its 2009 restructuring, which split the company into a municipal guarantee business and a structured finance unit that had suffered heavy losses from mortgages.

Bank of America Corp and other lenders have sought to have that restructuring annulled and sued the company, alleging that it was intended to defraud policy holders. In a March 4 ruling, a New York state judge upheld the restructuring. That ruling is being appealed.

In its annual report in February, MBIA said its structured finance unit could be forced into liquidation or rehabilitation if litigation with Bank of America was not settled. The bond insurer has also blamed its liquidity issues on the bank’s refusal to buy back billions of dollars in securitizations that MBIA insured.

“Substantial doubt exists about MBIA Corp’s ability to continue as a going concern,” the insurer said in a statement at the time.

MBIA is also suing Bank of America’s Countrywide unit accusing it of misrepresenting the underwriting on thousands of loans backing some $20 billion in securities it had insured.

Representatives for MBIA and the Department of Financial Services declined to comment Friday evening. Representatives for Weil could not be immediately reached for comment after business hours Friday.

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