By Karen Freifeld
Dec 14 (Reuters) - Bank of America Corp has sued bond
insurer MBIA Inc in a New York state court for allegedly
interfering with a tender offer to buy MBIA's bonds.
At issue is a change MBIA sought to make to the terms of
some bonds to eliminate the risk that it might be considered in
default if a troubled unit were put into rehabilitation or
liquidation by New York regulators.
Bank of America countered with an offer to buy the bonds,
saying it believed the changes would increase the risk of MBIA's
insurance unit being placed in rehabilitation or liquidation,
which could jeopardize all policyholder claims.
On Thursday, Bank of America said it had purchased $136
million of a senior note in that tender, and issued a default
notice over the attempt to change terms.
The bank claims in the lawsuit that the consent solicitation
was the latest of MBIA's "premeditated and subversive actions"
since 2008 to benefit executives and stockholders to the
detriment of Bank of America and other policyholders.
In the lawsuit, filed late Thursday, Bank of America alleged
that MBIA illegally interfered with its tender offer and asked
for the consent solicitation and amendment to be declared
invalid. The bank also is seeking punitive and other damages.
An MBIA spokesman did not have an immediate comment on the
lawsuit. MBIA shares were down 3.2 percent at $8.25 on Friday
morning on the New York Stock Exchange.
The legal wrangling is a major cloud hanging over both
companies, which have struggled to recover from mortgage-related
troubles from the financial crisis.
MBIA claims that Bank of America owes it billions of dollars
over soured mortgages that it wants the bank to buy back. Bank
of America says the insurer owes it billions over certain credit
default swap transactions.
MBIA and Bank of America were in court this week on
pre-trial motions in a 2008 case the bond insurer brought
against Bank of America's Countrywide Financial unit, accusing
the lender of misrepresenting the quality of loans underlying
mortgage-backed securities it insured.
MBIA claims the bank should be liable for refusing to buy
back defective loans.
The two are also awaiting a decision by a New York judge
over whether the state insurance department was right to approve
MBIA's 2009 split into two units.
Bank of America claims it was harmed in the restructuring
when $5 billion was transferred out of the MBIA unit that
insures risky mortgage debt and into a new unit that guarantees
municipal bonds. The judge must rule on whether to annul that
The newest case is Bank of America Corp. v MBIA Inc, New
York State Supreme Court, 70444/2012, County of Westchester.
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