MBIA Inc. : Blog Coverage MBIA Announced Offer of Financial Backing to its Subsidiary MBIA Insurance Corporation to Fulfil its Future Obligations

Upcoming AWS Coverage on Allstate Post-Earnings Results

LONDON, UK / ACCESSWIRE / November 29, 2016 / Active Wall St. blog coverage looks at the headline from MBIA Inc. (NYSE: MBI) as the company announced on November 28, 2016, that it along with some of the holders of its Surplus Notes had agreed to provide financing for its wholly owned subsidiary - MBIA Insurance Corp. The funds will be utilized by MBIA Corp. to meet its anticipated insurance claims on its insurance policy with regards to its Zohar II Notes which mature on January 20, 2017. Register with us now for your free membership and blog access at: http://www.activewallst.com/register/.

One of MBIA's competitors within the Property & Casualty Insurance space, The Allstate Corp. (NYSE: ALL), reported on November 02, 2016, its financial results for the quarter ended September 30, 2016 on its current report on Form 8-K. AWS will be initiating a research report on Allstate in the coming days.

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The Financing

MBIA Corp. has accepted a binding commitment letter from the holders of MBIA's 14% Fixed-to-Floating Rate Surplus Notes, wherein the note-holders have agreed to provide senior financing for $325 million on certain conditions. MBIA Inc. will add to this kitty an amount of $38 million in subordinate financing. The company will also add another $60 million from its own resources to this pool. The combined funds will be utilized to pay towards the maturing Zohar II notes. The Zohar II notes have approximately $772 million of gross par outstanding as of June 30, 2016, and are maturing on January 20, 2017. MBIA Inc. has also assured MBIA Corp. of an additional $50 million in subordinated financing, if the need arises.

The Fixed-to-Floating Rate Surplus Notes will mature on January 20, 2020, and will bear interest at 14% per annum, payable quarterly in arrears. The note-holders' financing is secured against any reimbursements and repayments that MBIA Corp. manages to recover from the claims for the policy that it had taken to insure the Zohar I Notes. MBIA Corp. plans to auction off the assets that it owns by way of Zohar I, which is scheduled to be completed by December 3, 2016.

Commenting on the financing, Anthony McKiernan, MBIA Corp.'s President and Chief Financial Officer said:

"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."

Understanding of the Situation

MBIA's corporate strategy has been to explore various options including restructuring or repurchase of certain Zohar II Notes as well as tapping third party financing to meet the financial obligations with regards to the Zohar II notes. On September 2016, MBIA Corp. had sold off its UK subsidiary MBIA UK (Holdings) Limited to a subsidiary of Assured Guaranty Ltd. The deal required Assured Guaranty to take over the outstanding Zohar II notes worth $347 million and $23 million in cash from MBIA UK in lieu of all shares of MBIA UK.

The current financing along with the sale of the UK subsidiary will help MBIA Corp. to meet its insurance obligations relating to its insurance policy insuring the Zohar II Notes. However, the asset sale and the financing need to be approved by Prudential Regulation Authority, the Financial Conduct Authority of the United Kingdom, the New York State Department of Financial Services, and the Maryland Insurance Administration. The financing is expected to close by January 20, 2017. However, despite the sale of the UK subsidiary and the financing backing from MBIA, Inc., there is no assurance that MBIA Corp. will be able to meet its financial obligations to all policyholders.

Stock Performance

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