Recent maneuvers suggest BofA-MBIA pact likely: analysts

Wed Dec 12, 2012 5:39pm EST
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By Rick Rothacker

(Reuters) - A long-running legal dispute between Bank of America Corp BAC.N and insurer MBIA Inc MBI.N could be settled in early 2013 after recent maneuvers involving MBIA's bonds, analysts at research firm CreditSights wrote.

MBIA won the necessary consent of bondholders to change the terms of some of its debt last month, despite a move by Bank of America to thwart the change. That outcome has reduced the bank's negotiating leverage, increasing the likelihood of a settlement, the analysts wrote in a report dated Tuesday.

Bank of America, the second largest U.S. bank by assets, last week also said that it was proceeding with an offer to buy some of MBIA's bonds, which could be part of a settlement strategy, according to the report. <ID: L1E8N6098> The bank took a similar approach in a pact this year with insurer Syncora Holdings Ltd SYCRF.PK, CreditSights said.

"We speculate that BofA is adding exposure to MBIA's capital structure to conceal the amount of a settlement so as to not set a precedent for negotiations with other litigants," analysts Rob Haines and Eric Axon wrote.

MBIA and Bank of America declined comment.

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.

CreditSights said it expects a comprehensive settlement that would cover both issues.   Continued...

A view of the Bank of America's Tower in New York October 24, 2012. REUTERS/Eduardo Munoz