MBI Saga Over: Bank Of America To Settle Long-Running Litigation, Take 5% Stake; MBIA Stock Soars 50%

Tyler Durden's picture

The seemingly endless MBIA saga, in which the mortgage insurer sued Bank of America and where a settlement has been overdue for some two years (see here), is finally coming to an end. Moments ago Dow Jones reported what the final settlement may look like: $1.6 billion in cash as well as a $500 million line of credit. Just as notable, BAC will buy a 5% equity stake in the name. MBIA was briefly halted as a circuit breaker was triggered, and has continued to surge following the unhalt. As a reminder, a settlement in this case may push the company into the $20 handle realm. Finally, our report from September 2011 on MBIA's potential to be the next Volkswagen courtesy of its massive short interest as a percent of float can be found here.

The WSJ, which broke the news, has more:

Bank of America will pay MBIA $1.6 billion in cash, along with some other compensation, and provide MBIA with a credit line of $500 million. BofA will also take a stake in MBIA's holding company of roughly 5%.


The settlement follows talks that have been on-again/off-again for more than six months, said people familiar with the matter. The two sides worked through the weekend, as did New York Department of Financial Services Superintendent Benjamin Lawsky, to bring about the deal.


It is one of the last overhangs for MBIA, which was sued by more than a dozen banks over its split during the financial crisis into one healthier bond insurer that focuses on guaranteeing municipal-bond payments and another that insured complex financial instruments and mortgage securities that soured during the crisis.


Mr. Lawsky inherited the matter when he took over as New York's superintendent of financial regulation in October 2011, and he has pushed for more than a dozen deals with banks and MBIA to try to keep the state from taking it over, which is known as receivership.

BofA is surging...


But not like MBIA...


And from BTIG as of 2011 which predicted this final outcome, and a $22.50
price target if and when the long-overdue settlement was finally


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spastic_colon's picture

funny how i'll never see a dime of the gains from my tax dollars being used for the settlement

12ToothAssassin's picture

Wait I thought halts were only for stocks falling? What lunacy is this?

ihedgemyhedges's picture

I am long of MBIA as of Friday's close and went long of gold in JPY at the very bottom.


D. Gartman

adr's picture

Another day of how insider A made himself 55% richer in ten minutes.

Bubbles Bernanke must be getting the greatest presents sent to him in the history of man.

Omen IV's picture

Obama signed exemption for congress and employees of the government for insider trading violations on information provided to government ..........in last ten days!

DelusionalGrandeur's picture

Exactly and I'll never fucking understand why the rest of Amurika (who isn't asleep at the wheel, or busy abusing their EBT cards) wasn't up in fucking arms over that shitty move by our favorite usurper in chief? How in thefucking, fuck, fuck fuck was insider trading ever allowed by Congress in the first God damn place, and why hasn't his head rolled for allowing more of the same? So not only does Bennie get to inject his load every month into the system, the CONgress, who are supposed to be held accountable to us, get to turn around and trade on thuggery inside info, further fucking the previously aforementioned group of Amurikans! Congrats to you CONgress and your hnic. I hope more moves like this finally implode your house of cards down around your necks and may they weigh as heavy as yokes, pulling you six feet under where you belong with the worms.
Now that I got that off my chest..........................
I congratulate those here in the fight club who heeded the advice of Mr.Durden for sure! You deserve every red cent and I hope you figure out a way to fuck uncle Sam, on the tax burden.

jubber's picture

Someone remind me how many Bankers went to Jail for this?

mccoyspace's picture

Congrats to Tyler for calling this one ages ago. That was a looooong time coming. My patience had run out waiting for it some time ago and I haven't held any of the MBIA stock for a while now. Good job to any ZH'er that took the advice and held on all this time.

kaa1016's picture

ZeroHedge called this one a long time ago. Hopefully you guys made some money on this one. Good call...

Herd Redirection Committee's picture

The beauty of options, you make money hand over fist when you are right.  The downside is that timing is of crucial importance.    Well done, Tyler(s).

knukles's picture

That's a lotta BenniBucks BoA gets to borrow for free from the Fed.

Frank N. Beans's picture

from S&P report May 2:


05/02/13 01:26 pm ET ... S&P DOWNGRADES



our 12-month target price by $3.00 to $7.00,

which assumes the shares of this bond insurer

trade at about 50% of fully diluted tangible common

equity, reflecting our view of the company's

distressed financial situation and possible

increased likelihood of regulatory intervention.

MBI has, in recent periods, encountered a

number of legal setbacks to its claims against

counterparties in a number of structured finance

transactions. While we view the company's

financial situation as precarious, we note

that these shares are highly volatile. /C. Seifert"


So will we see $20 before we see $7? ?

CvlDobd's picture

Brian Wesbury talks so much shit about ZeroHedge being a terrible market forecaster and full of bad advice.


I've never seen a Brian Wesbury call up this much. I have seen him tweet about wanting to fuck a plowhorse or something along those lines.

cramers_tears's picture

Thank you Tyler.  I love it when you give away free stuff.  MBI was the Nov-12 free gift for the ZH Constituency.  You're not going to get any free gifts at the fuckin' WSJ or the FT...  keep reading ZH - the only Financial Site that gives away free stuff.

I sniffed a pop on Friday w/ the options market up 3x - http://finance.yahoo.com/news/why-large-trader-selling-calls-155532820.html and Toner Man and his crew on their personal cell phones w/ their brokers all day Friday.

apu123's picture

I lost patience and sold about 60% of my position on Friday.  Man am I glad I keep the rest!