MBIA INC. (NYSE:MBI) Files An 8-K Entry into a Material Definitive Agreement

MBIA INC. (NYSE:MBI) Files An 8-K Entry into a Material Definitive Agreement

Item1.01 ENTRY INTO MATERIAL DEFINITIVE AGREEMENTS.

Item2.01 COMPLETION OF DISPOSITION OR ACQUISITION OF
ASSETS.

Item2.03 CREATION OF A DIRECT FINANCIAL OBLIGATION OR AN
OBLIGATION UNDER AN OFF BALANCE SHEET ARRANGEMENT OF THE
REGISTRANT

Sale of MBIA UK and Entry into Financing Facility by MBIA
Insurance Corp.

MBIA Inc. (the Company) today announced that its wholly-owned
subsidiary, MBIA Insurance Corporation (MBIA Corp.), has
consummated two previously announced transactions (the
Transactions), which are described below and were previously
disclosed in filings on Form 8-K filed on September29, 2016, and
November28, 2016, respectively (the Prior 8-Ks). The Prior 8-Ks
described the material terms of the Transactions. Such
descriptions are qualified in their entirety by reference to the
descriptions below and by reference to the Exhibits to the Prior
8-Ks and by the exhibits hereto. The Transactions were subject to
various regulatory approvals, which were obtained.

In one of the transactions, MBIA Corp.s wholly owned subsidiary,
MBIA UK (Holdings) Limited (MBIA UK Holdings), sold its operating
subsidiary, MBIA UK Insurance Limited (MBIA UK), to Assured
Guaranty Corp. (Assured), a subsidiary of Assured Guaranty Ltd.
In exchange for MBIA UK and a cash payment of $23 million to
Assured, MBIA UK Holdings received certain notes owned by Assured
that were issued by Zohar II 2005-1 CLO (Assured Zohar II Notes),
which had an aggregate outstanding principal amount of
approximately $347 million as of September30, 2016.

In the second transaction, MBIA Corp. consummated a financing
facility, as described in more detail below, with affiliates of
certain holders of 14% Fixed-to-Floating Rate Surplus Notes of
MBIA Corp. (collectively, the Senior Lenders), and with the
Company, to which the Senior Lenders have provided $328.25
million of senior financing and the Company has provided $38
million of subordinated financing (the Senior Lenders and the
Company being referred to herein as, the Lenders) to MZ Funding
(as defined below), which in turn lent the proceeds of such
financing to MBIA Corp. MBIA Corp. will use the net proceeds of
the financing, together with approximately $60 million from its
own resources, to pay an anticipated claim (the Zohar II Claim)
on its insurance policy (the Zohar II Policy) insuring certain
notes (the Zohar II Notes) issued by Zohar II 2005-1 Limited and
Zohar II 2005-1 Corp. (together, Zohar II) on January20, 2017
(the Zohar Maturity Date), which had approximately $770 million
of par outstanding at September30, 2016. Under the Facility (as
defined below), MBIA Inc. has agreed to provide an additional $50
million of subordinated financing to MZ Funding, which MZ Funding
will lend to MBIA Corp. if needed by MBIA Corp. for liquidity
purposes. The Transactions will enable MBIA Corp. to satisfy the
Zohar II Claim.

In connection with the financing, a bankruptcy remote special
purpose entity called MZ Funding LLC (MZ Funding) was organized
as a wholly owned subsidiary of the Company to act as the direct
borrower from the Senior Lenders and from the Company. to the
Senior Note Indenture, dated as of January10, 2017 (the Senior
Note Indenture), MZ Funding issued its 14% Insured Senior Notes
due January20, 2020, having an initial aggregate principal amount
of up to $328.25 million (the Insured Senior Notes). The Insured
Senior Notes are guaranteed to a financial guaranty insurance
policy issued by MBIA Corp. to the Subordinated Note Indenture,
dated as of January10, 2017 (the Subordinated Note Indenture), MZ
Funding (i)issued its 14% Insured Subordinated Notes due
January20, 2020, having an initial aggregate principal amount of
$38 million (the Initial Insured Subordinated Notes) and (ii)may
from

time to time on or after the closing date on January10, 2017
issue additional 14% Insured Subordinated Notes due January20,
2020, with an aggregate principal amount of up to $50 million
(the Additional Insured Subordinated Notes and, together with the
Initial Insured Subordinated Notes, the Insured Subordinated
Notes and, together with the Insured Senior Notes, the Notes).
The Insured Subordinated Notes are guaranteed to a financial
guaranty insurance policy issued by MBIA Corp. Wilmington Savings
Fund Society, FSB (WSFS) will act as trustee and collateral agent
under the Senior Note Indenture and the Subordinated Note
Indenture.

The Senior Lenders and MZ Funding entered into a Senior Note
Purchase Agreement, dated as of January10, 2017 (the Senior NPA),
to which the Senior Lenders purchased the Insured Senior Notes
with an aggregate principal amount of $328.25 million, and the
Company entered into a Subordinated Note Purchase Agreement with
MZ Funding, dated as of January10, 2017 (the Subordinated NPA),
to which the Company purchased the Initial Insured Subordinated
Notes with an aggregate principal amount of $38 million.In
addition, under the Subordinated NPA, the Company committed to
purchase up to $50 million of Additional Insured Subordinated
Notes, if needed by MBIA Corp. to provide additional liquidity to
MBIA Corp. to pay claims or for other purposes as described below
and in the Credit Agreement (as defined below). Such commitment
is conditioned on no insolvency proceeding having been commenced
in respect of MBIA Corp. or MZ Funding.

In connection with the Facility, MZ Funding entered into a Credit
Agreement with MBIA Corp. (the Credit Agreement; and the loans
thereunder, the MBIA Loans) to which it immediately lent the
proceeds of the Notes to MBIA Corp. The Notes and the MBIA Loans
are referred to herein as the Facility. MBIA Corp. will use the
net proceeds of the loans made under the Credit Agreement on the
closing date of the Facility, together with approximately $60
million from its own resources (the MBIA Corp. Payment), to pay
the Zohar II Claim on the Zohar Maturity Date as described above.

MBIA Corp. is required to promptly submit a written request to MZ
Funding to make an additional loan (Additional Loans), and MZ
Funding is required to issue to the Company (and the Company is
obligated to purchase) Additional Insured Subordinated Notes, in
the aggregate amount of up to $50 million minus the outstanding
principal amount of any outstanding Additional Loans (the Undrawn
Amount) (i)immediately upon the earlier of: (x)such time as MBIA
Corp. consents to the filing of a petition for an Insolvency
Proceeding, or (y)such time as the Superintendent informsMBIA
Corp. that a filing of a petition for an Insolvency Proceeding in
respect of MBIA Corp. is imminent, (ii)if the Senior Insured
Notes have not been paid in full as of July10, 2019, (iii)if as
of the last day of any fiscal quarter of MBIA Corp. the Statutory
Surplus of MBIA Corp. is less than $65,000,000 (iv)the Available
Liquidity less the Undrawn Delayed Draw Amount of MBIA
Corp. is less than $20,000,000 or (v)MBIA Corp. determines that
it requires the Undrawn Amount for liquidity purposes;
provided, however, in the event MBIA Corp. submits
a request for a Delayed Draw Loan on account of subsection
(iv)above, MBIA Corp. shall only be required to draw Delayed Draw
Loans in increments of $12,500,000 until such time that
subsection (iv)above is no longer applicable.

The Notes and the MBIA Loans will mature on January20, 2020 and
will bear interest at 14%per annum,payable quarterly in arrears.
Interest on the Notes will be payable in cash, but may be payable
in kind at the option of MBIA Corp. to the extent that recoveries
on the Collateral and the Cash Sweep (referred to below) is less
than the accrued but unpaid interest on the Notes.

If at the end of any fiscal quarter, MBIAs Available Liquidity
(as defined in the Credit Agreement) exceeds $150 million and
MBIA Corp.s Statutory Surplus (as defined in the Credit
Agreement) exceeds $250 million, MBIA Corp. will make a payment
on the MBIA Loans in the amount by which the Available Liquidity
exceeds $150 million, except that during the first 18 months
after the closing of MBIA Loans, the payment may be limited to
the amount of the accrued but unpaid interest with the

amount of any recovery in excess of accrued interest placed in an
interest bearing account subject to the liens in favor of the
Senior Lenders in lieu of the payment of principal on the MBIA
Loans.This payment, which is referred to as the Cash Sweep, will
be subject to approval, or non-disapproval, of the New York State
Department of Financial Services (NYSDFS). In the event the
NYSDFS objects to or otherwise prevents any portion of the
payments described above, MBIA Corp. shall, subject to NYSDFS
approval to make such payment, pay all approved portions of the
Cash Sweep Amount, as provided for herein, and, if such deposit
is approved by the NYSDFS, deposit any unapproved portion of the
Cash Sweep Amount into the Mandatory Prepayment Account (as
defined in the Credit Agreement).

Also, MBIA Corp. will be required to apply any recoveries in
respect of the Collateral to the repayment of the MBIA Loans,
except that during the first 18 months after closing of the MBIA
Loans, MBIA Corp. may elect to place the amount of any recovery
in excess of accrued interest in an interest bearing account
subject to the liens in favor of the Senior Lenders in lieu of
the payment of principal on the MBIA Loans.Any repayment of
principal on the MBIA Loans during the first 18 months will be
subject to a declining make-whole payment as set forth in the
Credit Agreement, calculated as a percentage of the principal
amount being repaid.

The Facility is secured by a first priority security interest in
all of MBIA Corp.s right, title and interest in the Zohar I
Collateral and the Zohar II Collateral, as such terms are defined
in the Security Agreement attached as Exhibit 99.6 hereto,
(collectively, including any proceeds thereof, the Collateral).
In addition, the Insured Senior Notes are secured by a pledge of
the Companys interest in MZ Funding to the Pledge Agreement
attached as Exhibit 99.9 hereto. Any payments on or recoveries
made on the Zohar II Collateral will be allocated on a pro-rata
basis to repayment of the Facility and the MBIA Corp. Payment.

The Insured Senior Notes are secured by a first lien on the
Collateral, and the Insured Subordinated Notes are secured by a
second lien on the Collateral. The Company, MZ Funding and the
trustees under the Senior Note Indenture and the Subordinated
Note Indenture have entered into an Intercreditor Agreement,
attached as Exhibit 99.10 hereto (the Intercreditor Agreement),
to which any amounts due the Company in respect of the Insured
Subordinated Notes or from the MBIA Corp. Policies insuring the
Insured Subordinated Notes are subordinated to payment in full of
the Insured Senior Notes until the amounts owed to the Senior
Lenders in respect of the Insured Senior Notes have been paid in
full. Therefore, at any time that the MBIA Loans are repaid, MZ
Funding is required to apply the repayment first to the payment
of interest and principal on the Insured Senior Notes and, after
the Insured Senior Notes are paid in full, to the payment of the
Insured Subordinated Notes, subject to certain reimbursements
payable to MBIA Corp. The Companys ability to collect the
principal and interest on the Insured Subordinated Notes will be
based primarily on the amount recovered by MBIA Corp. with
respect to the Collateral, after payment in full of the Insured
Senior Notes and other related payment obligations that are
senior to the Insured Subordinated Notes to the Intercreditor
Agreement. Based on the estimated value of the Collateral in
relation to the amount of the Senior Insured Notes and the
Subordinated Insured Notes, the Company expects that the
recoveries from the Collateral will be sufficient to enable the
payment in full of the Subordinated Insured Notes. There is
uncertainty, however, with respect to the realizable value of the
Collateral and there can be no assurance that recoveries on the
Collateral will be sufficient to pay the Subordinated Insured
Notes in full or that, in the event that recoveries on the
collateral are not sufficient to pay the subordinated Insured
Notes in full, that MBIA Corp. will be able to pay any shortfall
necessary to pay the Subordinated Insured Notes in full under the
policy insuring the Subordinated Insured Notes.

to the Credit Agreement MBIA Corp. will be making publicly
available the following information:

(i) all cash received by MBIA Corp. or its affiliates as proceeds
(i)of the Zohar I Collateral (as defined in the Credit Agreement)
or the Zohar II Collateral (as defined in the Credit Agreement)
during the preceding calendar quarter;

(ii) all assets obtained by MBIA Corp. or its affiliates from
Zohar II, Zohar CDO 2003-1, Limited, Zohar CDO 2003-1, Corp. and
Zohar CDO 2003-1, LLC during the preceding calendar quarter;

(iii) the outstanding principal amount of the Senior Insured
Notes as of the end of the preceding calendar quarter;

(iv) the outstanding principal amount of the Subordinated Insured
Notes as of the end of the preceding calendar quarter;

(v) the interest paid in cash on the Senior Insured Notes during
the preceding calendar quarter;

(vi) the interest paid in cash on the Subordinated Insured Notes
during the preceding calendar quarter;

(vii) the amount by which the outstanding principal of the Notes
have increased in connection with MZ Fundings election to pay in
kind interest due and owing on an interest payment date as of the
end of the preceding calendar quarter; and

(viii) contained in the quarterly Interest and Principal Payment
Certification for each Interest Payment Date.

The information described in clause (i)above will be disclosed on
a monthly and quarterly basis, for the previous calendar month or
quarter, as the case may be, and the information described in
clauses (ii)through (viii)above will be disclosed on a quarterly
basis for the previous calendar quarter. Such information will be
made publicly available by posting such information on the MBIA
Inc. web site or in MBIA Inc.s periodic SEC reports.

The Facility contains customary and other representations and
warranties and affirmative, negative and financial covenants and
events of default as set forth in the Credit Agreement.

Notwithstanding the transactions entered into today, MBIA Corp.
believes that if the NYSDFS concludes at any time that MBIA Corp.
will not be able to pay its policyholder claims, the NYSDFS would
likely put MBIA Corp. into a rehabilitation or liquidation
proceeding under Article 74 of the New York Insurance Law and/or
take such other actions as the NYSDFS may deem necessary to
protect the interests of MBIA Corp.s policyholders. The
determination to commence such a proceeding or take other such
actions is within the exclusive control of the NYSDFS. The NYSDFS
enjoys broad discretion in this regard, and no assurance is given
as to what action, if any, the NYSDFS may take.

Given the separation of the Company and MBIA Corp. as distinct
legal entities, the absence of any material intercompany lending
agreements or cross defaults between the entities, and the lack
of reliance by the Company on MBIA Corp. for the receipt of
dividends, neither of the transactions announced today are
expected to have a material impact on the Companys financial
position and results of operations, except to the extent that a
material portion of the Subordinated Insured Notes is not paid at
maturity.

The description of the Facility described herein is qualified by
reference to the Exhibits attached hereto.

A copy of the following documents, in each case dated as of
January10, 2017, is attached hereto as Exhibits 99.1 through
99.10 and is incorporated herein by reference:

(i)

Senior Note Indenture, between MZ Funding, as issuer, and WSFS, as indenture trustee and collateral agent;

(ii)

Form of $328,250,000 14% Senior Secured Notes, due January20, 2020, issued to the Senior Note Indenture;

(iii)

Subordinated Note Indenture, between MZ Funding, as issuer, and WSFS, as indenture trustee and collateral agent;

(iv)

Form of up to $88,000,000 14% Subordinated Secured Notes, due January20, 2020, issued to the Subordinated Note Indenture;

(v)

Credit Agreement, between MBIA Corp., as borrower, and MZ Funding, as lender;

(vi)

Security Agreement, between MBIA Corp, as grantor, and MZ Funding, as secured party;

(vii)

Security Agreement, between MZ Funding, as grantor, and WSFS, as collateral agent under the Senior Note Indenture;

(viii)

Security Agreement, between MZ Funding, as grantor, and WSFS, as collateral agent under the Subordinated Note Indenture;

(ix)

Pledge Agreement, between the Company, as pledgor, and WSFS, as collateral agent under the Senior Note Indenture; and

(x)

Intercreditor Agreement, among WSFS, in its capacities as trustee under the Senior Note Indenture and the Subordinated Note Indenture, MBIA Corp., as insurer, and MZ Funding.

Item9.01 Financial Statements and Exhibits.

99.1		Senior Note Indenture, between MZ Funding, as issuer, and WSFS, as indenture trustee and collateral agent;
99.2		Form of $328,250,000 14% Senior Secured Notes, due January 20, 2020, issued to the Senior Note Indenture;
99.3		Subordinated Note Indenture, between MZ Funding, as issuer, and WSFS, as indenture trustee and collateral agent;
99.4		Form of up to $88,000,000 14% Subordinated Secured Notes, due January 20, 2020, issued to the Subordinated Note Indenture;
99.5		Credit Agreement, between MBIA Corp., as borrower, and MZ Funding, as lender;
99.6		Security Agreement, between MBIA Corp, as grantor, and MZ Funding, as secured party;
99.7		Security Agreement, between MZ Funding, as grantor, and WSFS, as collateral agent under the Senior Note Indenture;
99.8		Security Agreement, between MZ Funding, as grantor, and WSFS, as collateral agent under the Subordinated Note Indenture;
99.9		Pledge Agreement, between the Company, as pledgor, and WSFS, as collateral agent under the Senior Note Indenture; and
99.10		Intercreditor Agreement, among WSFS, in its capacities as trustee under the Senior Note Indenture and the Subordinated Note Indenture, MBIA Corp., as insurer, and MZ Funding.

Forward-Looking Statements

The information contained in this Current Report should be read
in conjunction with our filings made with the Securities and
Exchange Commission. This report includes statements that are not
historical or current facts and are forward-looking statements
made to the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995. The words believe, anticipate,
project, plan, expect, intend, will likely result, looking
forward or will continue, and similar expressions identify
forward-looking statements. These statements are subject to
certain risks and uncertainties that could cause actual results
to differ materially from historical earnings and those presently
anticipated or projected, including, among other risks and
uncertainties, the possibility that the Company will experience
increased credit losses or impairments on public finance
obligations we insure issued by state, local and territorial
governments and finance authorities that are experiencing
unprecedented fiscal stress, the possibility that MBIA Insurance
Corporation will have inadequate liquidity to pay expected claims
as a result of increased losses on certain structured finance
transactions, in particular residential mortgage-backed
securities transactions that include a substantial number of
ineligible mortgage loans, or a delay or failure in collecting
expected recoveries, the possibility that loss reserve estimates
are not adequate to cover potential claims, a disruption in the
cash flow from our subsidiaries or an inability to access capital
and our exposure to significant fluctuations in liquidity and
asset values within the global credit markets as a result of
collateral posting requirements, our ability to fully implement
our strategic plan, including our ability to maintain high stable
ratings for National Public Finance Guarantee Corporation and
generate investor demand for our financial guarantees,
deterioration in the economic environment and financial markets
in the United States or abroad, and adverse developments in
European sovereign credit performance, real estate market
performance, credit spreads, interest rates and foreign currency
levels, the effects of governmental regulation, including
insurance laws, securities laws, tax laws, legal precedents and
accounting rules; and uncertainties that have not been identified
at this time. These and other factors that could affect financial
performance or could cause actual results to differ materially
from estimates contained in or underlying the Companys
forward-looking statements are discussed under the Risk Factors
section in MBIA Inc.s most recent Annual Report on Form 10-K and
Quarterly Report on Form 10-Q, which may be updated or amended in
the Companys subsequent filings with the Securities and Exchange
Commission. The Company cautions readers not to place undue
reliance on any such forward-looking statements, which speak only
to their respective dates. The Company undertakes no obligation
to publicly correct or update any forward-looking statement if it
later becomes aware that such result is not likely to be
achieved.

to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.

Date: January10, 2017

EXHIBIT INDEX TO CURRENT REPORT ON FORM 8-K

Dated January10, 2017

99.1		Senior Note Indenture, between MZ Funding, as issuer, and WSFS, as indenture trustee and collateral agent;
99.2		Form of $328,250,000 14% Senior Secured Notes, due January 20, 2020, issued to the Senior Note Indenture;
99.3		Subordinated Note Indenture, between MZ Funding, as issuer, and WSFS, as indenture trustee and collateral agent;
99.4		Form of up to $88,000,000 14% Subordinated Secured Notes, due January 20, 2020, issued

About MBIA INC. (NYSE:MBI)
MBIA Inc. (MBIA) is a holding company. The Company, through its subsidiary, National Public Finance Guarantee Corporation (National), is engaged in providing financial guarantee insurance to the United States public finance markets. MBIA’s segments include United States (U.S.) public finance insurance, international and structured finance insurance, and corporate. The U.S. public finance insurance segment is operated through National, and is engaged in generating new insurance business in National, consistent with its portfolio management and return requirements, and to maximize the economics of its existing insured portfolio through surveillance and remediation. The international and structured finance insurance business is primarily operated through MBIA Insurance Corporation and its subsidiaries (MBIA Corp.). The corporate segment is operated through the Company and its subsidiaries, including its service company, MBIA Services Corporation (MBIA Services). MBIA INC. (NYSE:MBI) Recent Trading Information
MBIA INC. (NYSE:MBI) closed its last trading session up +0.21 at 10.83 with 952,691 shares trading hands.