Judge Denies MBIA's Motion To Dismiss Lawsuit Over Its Split

For the second time this month, bond insurer MBIA Inc. (MBI) failed in a motion to have a lawsuit against it dismissed.

On Wednesday, Judge James A. Yates denied MBIA's motion to dismiss a suit brought against it in New York state court by a group of banks that are challenging MBIA's split into two insurers. MBIA's split was approved by New York State's insurance regulator.

The banks include ABN Amro Bank NV, Canadian Imperial Bank of Commerce (CM), Citibank (C), JP Morgan Chase Bank (JPM), and several other large global banks.

All obtained financial guarantees from MBIA to cover losses in structured securities such as collateralized debt obligations backed by mortgage loans.

Last week, MBIA failed to win in its motion to dismiss a similar suit brought against it in federal court. The attorney representing plaintiffs in the federal suit said that he will seek to begin discovery soon.

An MBIA spokesman didn't immediately respond to a request for a comment.

Shares of MBIA were up 1% in recent trading to $5.09.

-By Lavonne Kuykendall, Dow Jones Newswires; 312-750-4141; lavonne.kuykendall@dowjones.com

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