Bond insurer MBIA appears to be in a fight for its life after Moody's downgraded the company's credit rating to speculative status.
The decision follows a week of strategic moves in which MBIA sought to protect its solvency by making changes in its bond agreements. Bank of America had announced it wanted to buy the bonds to prevent the changes.
On Wednesday, Moody's downgraded MBIA Insurance Corp. financial strength rating from “B3” to “Caa2,” which translates to poor standing and subject to high credit risk. The parent company, MBIA Inc.'s credit rating dropped from “B2” to “Caa1.”
“The developing outlook of MBIA Corp. reflects the meaningful uncertainty faced by MBIA Corp. and the potential that a global settlement between MBIA and Bank of America could lead to either an improvement or deterioration in the credit profile of the insurer, depending on the specific terms,” says Moody's in a statement.
On Nov. 13, Bank of America (BOA) made an unsolicited tender offer for the purchase of the senior notes after MBIA announced plans to change the restrictions on its notes that would allow the company to avoid default of its debt if MBIA Corp. were placed into rehabilitation or liquidation proceedings.
Yesterday, Armonk, N.Y.-based MBIA issued a statement recommending rejection of the BOA offer, contending that the real purpose of the offer is to affect the outcome of the legal wrangling between the two over settlement of residential mortgage-backed securities MBIA insured.
MBIA has pursued legal challenges against several mortgage lenders, including BOA, saying that the insurer was misled regarding the quality of the RMBS it insured.
Want to continue reading?
Become a Free PropertyCasualty360 Digital Reader
Your access to unlimited PropertyCasualty360 content isn’t changing.
Once you are an ALM digital member, you’ll receive:
- Breaking insurance news and analysis, on-site and via our newsletters and custom alerts
- Weekly Insurance Speak podcast featuring exclusive interviews with industry leaders
- Educational webcasts, white papers, and ebooks from industry thought leaders
- Critical converage of the employee benefits and financial advisory markets on our other ALM sites, BenefitsPRO and ThinkAdvisor
Already have an account? Sign In Now
© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.
