MBIA Insurance Corporation Announces Agreement to Sell Subsidiary
September 29 2016 - 6:30AM
Business Wire
MBIA Insurance Corporation (MBIA Corp.) today announced that its
wholly owned subsidiary, MBIA UK (Holdings) Limited (MBIA UK
Holdings), has entered into an agreement to sell MBIA UK Insurance
Limited (MBIA UK) to Assured Guaranty Corp. (Assured), a subsidiary
of Assured Guaranty Ltd. (NYSE: AGO). The purchase price consists
of the transfer to MBIA UK Holdings of notes issued by Zohar II
2005-1 CLO (Zohar II Notes) with an aggregate outstanding principal
amount of approximately $347 million (Assured Zohar II Notes) and a
cash payment by MBIA UK Holdings to Assured of $23 million. The
transaction is subject to certain closing conditions including the
receipt of regulatory approvals from the Prudential Regulation
Authority of the United Kingdom, the New York State Department of
Financial Services (NYSDFS) and the Maryland Insurance
Administration. The sale of MBIA UK, effectively in exchange for
the Assured Zohar II Notes, is part of MBIA Corp.’s strategy to
address the maturity of the Zohar II Notes on January 20, 2017,
which had approximately $772 million of gross par outstanding as of
June 30, 2016. MBIA Corp. does not currently expect that the Zohar
II CLO will have sufficient cash flow to repay all of the Zohar II
Notes at maturity. There is no assurance that the transaction will
be completed or that MBIA Corp.’s strategies will be successful.
The transaction is scheduled to close in early January of 2017.
Anthony McKiernan, Chief Financial Officer and President of MBIA
Insurance Corp., noted, “As we have previously stated, the sale of
MBIA UK is one of the elements of our plan to enable MBIA Corp. to
address its insurance obligations regarding the Zohar II Notes. The
acquisition of the Assured Zohar II Notes reduces MBIA Corp.’s
liability under its Zohar II policy and may facilitate our ability
to address the remaining Zohar II Notes on or before their
maturity.” He added, “While the sale of MBIA UK, if completed, will
be an important and meaningful accomplishment, MBIA Corp. still has
substantially more to do.”
MBIA Corp. is in the process of exploring a variety of
additional strategies to address its obligations with respect to
the Zohar II Notes. These strategies may involve the restructuring
or repurchase of certain Zohar II Notes that may require
substantial third party financing, which MBIA Corp. is seeking to
arrange. Its ability to do so, however, is constrained and there is
no assurance that it will be able to secure a financing on
acceptable terms. If, notwithstanding the transaction announced
today, MBIA Corp. is unable to successfully implement its
strategies for restructuring or otherwise satisfying its
obligations under the Zohar II Notes, it does not expect to have a
sufficient amount of liquid assets to pay all claims in respect to
the Zohar II Notes at maturity (irrespective of whether the sale of
MBIA UK is completed). MBIA Corp. anticipates that the approval by
the NYSDFS of the sale of MBIA UK, if granted, would be based on
(among other things) the NYSDFS concluding that MBIA Corp. will
successfully execute its strategies to meet and/or restructure its
obligations on the Zohar II Notes in a manner acceptable to the
NYSDFS.
MBIA Corp. believes that if the NYSDFS concludes at any time
that MBIA Corp. will not be able to restructure or otherwise
satisfy its obligations under the Zohar II Notes on terms
satisfactory to the NYSDFS, while maintaining sufficient assets to
readily pay other policyholder claims, the NYSDFS would likely put
MBIA Corp. into a rehabilitation or liquidation proceeding under
Article 74 of the New York Insurance Law and/or take such other
actions as the NYSDFS may deem necessary to protect the interests
of MBIA Corp.’s policyholders. The determination to commence such a
proceeding or take other such actions is within the exclusive
control of the NYSDFS. The NYSDFS enjoys broad discretion in this
regard, and any determination they may make would not be limited to
consideration of the matters described above. No assurance is given
as to what action, if any, the NYSDFS may take.
Barclays Capital is acting as financial advisor, and Debevoise
& Plimpton LLP is acting as legal advisor, on the sale of MBIA
UK.
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 Insurance Corporation is a wholly owned subsidiary of MBIA
Inc., which is headquartered in Purchase, New York. 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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version on businesswire.com: http://www.businesswire.com/news/home/20160929005391/en/
For MBIA Insurance CorporationGreg Diamond, 914-765-3190Investor
and Media Relationsgreg.diamond@mbia.com
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