Representatives of about 15 financial institutions will meet Thursday with New York State Insurance Superintendent Eric Dinallo to complain about MBIA Inc.'s decision to split its bond-insurance unit into two companies, people familiar with the matter said.
The group includes many banks that feel disadvantaged by MBIA's move last month to separate its municipal-bond insurance business from its commitments to insure mortgage-backed bonds and other structured securities. The banks are counterparties to MBIA on derivatives called credit-default swaps that were written on securities they own, many of which have deteriorated since the onset of the credit crisis.
MBIA and New York State's insurance regulator -- which endorsed the restructuring -- are facing a growing backlash from banks, investment funds and other policyholders. These institutions were left holding contracts with a financially weaker insurer when MBIA transferred about $5 billion in capital from its main unit to another company that guarantees only U.S. municipal bonds. A spokesman for Mr. Dinallo declined to comment.
http://online.wsj.com/article/SB123681662421102255.html#mod=testMod
Sophisticated hedge funds were relying on MBIA's insurance as a counterparty?
Please!
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