PURCHASE, N.Y.--(BUSINESS WIRE)--
MBIA Inc. (NYSE:MBI) (the Company) today announced that its wholly-owned
subsidiary, MBIA Insurance Corp. (MBIA Corp.), has accepted a binding
commitment letter dated November 25, 2016, from certain holders of 14%
Fixed-to-Floating Rate Surplus Notes of MBIA Corp., and from the
Company, pursuant to which the surplus noteholders or their affiliates
have agreed, subject to the satisfaction of certain closing conditions,
to provide senior financing of up to $325 million and the Company has
agreed to provide subordinated financing of $38 million to MBIA Corp.
(the Facility). MBIA Corp. will use the proceeds of the Facility,
together with approximately $60 million from its own resources, to pay
an anticipated claim on its insurance policy insuring certain notes
(Zohar II Notes) issued by Zohar II 2005-1, Limited and Zohar II 2005-1
Corp. (Zohar II), which mature on January 20, 2017. In addition to the
$38 million of subordinated financing to be provided by the Company
described above, the Company has agreed to provide up to an additional
$50 million of subordinated financing to MBIA Corp. under the Facility,
if needed, to provide additional liquidity to MBIA Corp. The Facility
will be secured by MBIA Corp.’s rights to reimbursement and recovery
with respect to the claim it paid under its policy insuring the class
A-1 and A-2 notes issued by Zohar CDO 2003-1, Limited Zohar I, and its
rights to reimbursement and recovery with respect to any claim paid
under its policy insuring the Zohar II Notes.
Anthony McKiernan, MBIA Corp.’s President and Chief Financial Officer
noted, “This financing, together with MBIA Corp.’s acquisition of the
Zohar II Notes from Assured and the use of its own resources, will
enable MBIA Corp. to satisfy its obligations on the Zohar II Notes on
January 20, 2017. The Zohar I Notes defaulted in November 2015 and the
Zohar II Notes are expected to default in January, which represents
approximately $1.3 billion in defaulted Zohar notes. We remain prepared
to work with Patriarch Partners and the collateral manager of the Zohar
entities to institute a transparent and comprehensive plan to sell or
refinance the assets owned by the Zohar entities in an orderly manner to
ensure that their obligations are fully satisfied. While we believe that
a consensual approach is preferable and in the interest of all parties,
in the absence of the implementation of a good faith plan, we will
continue to aggressively seek to enforce our rights to the full
reimbursement of the insurance claims we paid.”
The Company currently owns Zohar II Notes with an outstanding principal
amount of $38 million, and expects those notes to be paid in full on the
maturity date, subject to consummation of the Facility. The Company
concluded that, from an investment perspective, the return and risk
profile of the subordinated financing it has agreed to provide were
acceptable, taking into account the economic terms of the financing, the
substantial level of collateral that will secure the financing and the
expected payment at maturity of the Zohar II Notes it owns, and that it
was in the Company’s interest to provide the subordinated financing
described above in order to enable MBIA Corp. to pay its obligations
under the Zohar II Notes insurance policy and to provide additional
liquidity to MBIA Corp.
The closing of the Facility and of the sale of MBIA UK Insurance Limited
(MBIA UK) are expected to enable MBIA Corp. to successfully address its
insurance obligations relating to its insurance policy insuring the
Zohar II Notes. The closing of the Facility is subject to specified
conditions, including, but not limited to, MBIA Corp. acquiring the
Zohar II Notes with an outstanding principal amount of approximately
$347 million from Assured Guaranty Corp. in connection with the sale of
MBIA UK, as previously disclosed; receipt of any required regulatory
approvals from the New York State Department of Financial Services; and
the execution of final documentation. The closing of the Facility is
expected to occur no later than January 20, 2017. There is no assurance,
however, that the conditions precedent to the closing of the Facility or
to the sale of MBIA UK will be satisfied and that such transactions will
be consummated.
The material terms of the Facility and the potential consequences of the
failure to consummate the closing of the Facility or the sale of MBIA UK
are described in the Form 8-K filed by the Company today with the
Securities Exchange Commission and which is also available on the
Company’s web site at www.mbia.com.
Forward-Looking Statements
The information contained in this press release should be read in
conjunction with our filings made with the Securities and Exchange
Commission. This release includes statements that are not historical or
current facts and are “forward-looking statements” made pursuant to the
safe harbor provisions of the Private Securities Litigation Reform Act
of 1995. The words “believe,” “anticipate,” “project,” “plan,” “expect,”
“estimate,” “intend,” “will likely result,” “looking forward” or “will
continue,” and similar expressions identify forward-looking statements.
These statements are subject to certain risks and uncertainties that
could cause actual results to differ materially from historical earnings
and those presently anticipated or projected, including, among other
risks and uncertainties, the possibility that the Company will
experience increased credit losses or impairments on public finance
obligations we insure issued by state, local and territorial governments
and finance authorities that are experiencing fiscal stress, the
possibility that MBIA Corp. will have inadequate liquidity to pay claims
as a result of increased losses on certain structured finance
transactions, in particular residential mortgage-backed securities
transactions that include a substantial number of ineligible mortgage
loans, or a delay or failure in collecting expected recoveries, the
possibility that loss reserve estimates are not adequate to cover
potential claims, a disruption in the cash flow from our subsidiaries or
an inability to access capital and our exposure to significant
fluctuations in liquidity and asset values within the global credit
markets as a result of collateral posting requirements, our ability to
fully implement our strategic plan, including our ability to maintain
high stable ratings for National and generate investor demand for our
financial guarantees, deterioration in the economic environment and
financial markets in the United States or abroad, and adverse
developments in European sovereign credit performance, real estate
market performance, credit spreads, interest rates and foreign currency
levels, the effects of governmental regulation, including insurance
laws, securities laws, tax laws, legal precedents and accounting rules;
and uncertainties that have not been identified at this time. These and
other factors that could affect financial performance or could cause
actual results to differ materially from estimates contained in or
underlying the Company’s forward-looking statements are discussed under
the “Risk Factors” section in MBIA Inc.’s most recent Annual Report on
Form 10-K and Quarterly Report on Form 10-Q, which may be updated or
amended in the Company’s subsequent filings with the Securities and
Exchange Commission. The Company cautions readers not to place undue
reliance on any such forward-looking statements, which speak only to
their respective dates. The Company undertakes no obligation to publicly
correct or update any forward-looking statement if it later becomes
aware that such result is not likely to be achieved.
MBIA Inc. is a holding company whose subsidiaries provide financial
guarantee insurance for the public and structured finance markets.
Please visit MBIA's website at www.mbia.com.
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MBIA Inc.
Investor and Media Relations
Greg Diamond,
914-765-3190
greg.diamond@mbia.com
Source: MBIA Inc.