Bank of America (BAC) and insurer MBIA (MBI) may be nearing a resolution of their longstanding squabble over securities backed by residential mortgages.
MBIA insured principal and interest payments on mortgage-backed securities issued by Countrywide, which Bank of America acquired in 2008. MBIA has sued Bank of America to recover billions of dollars the insurer paid to investors who bought securities issued by Countrywide that later dropped significantly in value.
The two companies both have taken steps recently that could lead to their resolving claims against each other, according to an analysis that CreditSights, a research firm, published Tuesday.
On Nov. 26, MBIA said it obtained the consent of holders of its senior debt to changes in the indentures governing some of the company's obligations. The changes lower leverage Bank of America may hold over MBIA by virtue of the bank's refusal to accede to MBIA's demand it buy back some of the allegedly defective securities, according to CreditSights.
Roughly two weeks earlier, Bank of America launched a tender offer to purchase the debt to prevent what the bank said was a risk regulators would seize MBIA if the insurer's proposed changes to the debt succeeded.
"We believe that MBIA's successful consent solicitation has materially reduced Bank of America's leverage in any settlement negotiations," CreditSights wrote. "We speculate that B of A is adding exposure to MBIA's capital structure to conceal the amount of a settlement so as not to set a precedent for negotiations with other litigants."
CreditSights says it expects the companies to reach a deal by early 2013.
Spokesmen for both MBIA and Bank of America declined to comment on CreditSights' analysis, which was first
