Based on the terms of the agreement, BofA will reimburse $1.7bn, which includes nearly $1.6bn in cash and $137m principal amount of MBIA’s 5.70% Senior Notes due in 2034, that Bank of America acquired through a tender offer in December 2012.
In exchange of the settlement, MBIA will withdraw the court case filed in September 2008 against Countrywide Home Loans, among other parties, and later amended to include claims against Bank of America, for violating representations and warranties on certain MBIA-insured securitizations.
The US lender will cease its entire outstanding credit default swap (CDS) protection agreements purchased from MBIA on commercial mortgage-backed securities (CMBS), as well as terminate certain other trades in order to close out positions between the companies.
MBIA will also issue BofA warrants to purchase 9.94 million shares of MBIA common stock, or nearly 4.9% of its currently outstanding shares, at an exercise price of $9.59 per share.
Further, the US lender will provide a $500m three-year secured revolving credit agreement to MBIA, which will be used for general corporate purposes.
The Blackstone Group served as financial advisor to MBIA in connection with the settlement.
BofA serves nearly 52 million consumer and small business relationships with almost 5,400 retail banking offices and about 16,300 ATMs and also has 30 million online banking active users.
