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
Item 1.01 Entry into a Material Definitive Agreement.

Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.

MBIA Insurance Corp. Entry into Refinancing of MZ Funding Facility

MBIA Inc. (“the Company”) today announced that its wholly-owned subsidiary, MBIA Insurance Corp. (“MBIA Corp.”), has consummated the refinance transaction previously disclosed in the Company’s Form 8-K filing dated June 10, 2019. The June 10, 2019 Form 8-K described the material terms of the transaction. Such description is qualified in its entirety by reference to the description below and by the Exhibits attached hereto.

In the subject transaction, MBIA Corp. consummated a refinancing facility with MZ Funding LLC (“MZF”) and certain note purchasers, to which the purchasers or their affiliates (collectively, the “Senior Lenders”) refinanced the outstanding insured senior notes of MZF and the Company refinanced the outstanding insured subordinated notes of MZF (the Senior Lenders and the Company being referred to herein as, the “Lenders”) in the amounts and on the terms described below.

In connection with the refinance transaction, original notes issued by MZF on January 10, 2017 (the “Original MZF Notes”) were redeemed or amended, as applicable, the Senior Lenders purchased new senior notes issued by MZF (the “Insured Senior Notes”) with an aggregate principal amount of approximately $277.7 million, and the Company received amended subordinated notes issued by MZF (the “Insured Subordinated Notes” and together with the Insured Senior Notes, the “New MZF Notes”) with an aggregate principal amount of approximately $53.8 million (with the New MZF Notes replacing the Original MZF Notes). The Company is not obligated to purchase additional Insured Subordinated Notes. The New MZF Notes will mature on January 20, 2022 and will bear interest at 12% per annum, payable quarterly in arrears. Interest on the New MZF Notes will be payable in cash, but may be payable in kind at the option of MBIA Corp.; however, proceeds of, or recoveries on, the collateral and the cash sweep amount (referred to below) must be used to pay interest or principal in cash.

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MZF and MBIA Corp. had been parties to a credit agreement (the “Original Credit Agreement”) entered into on the date of issuance of the Original MZF Notes, to which MZF lent the proceeds of the Original MZF Notes to MBIA Corp. In connection with the refinance transaction, MZF and MBIA Corp. entered into an amended and restated credit agreement (the “New Credit Agreement” and the loans thereunder, the “MBIA Loans”). The maturity date of the New Credit Agreement and the New MZF Notes is January 20, 2022. MBIA Corp. issued new financial guaranty insurance policies (the “MBIA Corp. Policies”) unconditionally and irrevocably guaranteeing the timely payment of all principal and interest payments under the New MZF Notes, which obligations will be pari passu with the other insurance policy obligations of MBIA Corp., and are substantially similar to the policies that had been issued on the Original MZF Notes. The MBIA Corp. Policies will be held for the benefit of all holders of the New MZF Notes. When the New MZF Notes or an interest therein is transferred, the transferee will become automatically entitled to the benefits of the MBIA Corp. Policies. The New MZF Notes and the MBIA Loans are referred to herein as the “Facility.”

The Facility is secured by, among other things, all of MBIA Corp.’s right, title and interest in the recovery of its claims from Zohar CDO 2003-1, Limited (“Zohar I”) and Zohar II 2005-1, Limited (“Zohar II”) which include, among other things, loans made to, and various equity or LLC interests in, certain portfolio companies purportedly controlled by the sponsor and former collateral manager of Zohar I and Zohar II (the “Zohar Sponsor”) and claims that may exist against the Zohar Sponsor (together with additional assets set forth on an amended and restated security agreement, the “Collateral”). to the terms of an intercreditor agreement entered into in connection with the refinance transaction (the “Intercreditor Agreement”), the Insured Senior Notes have a first priority security interest in the Collateral, which ranks senior in priority and payment to the Insured Subordinated Notes, and claims arising under the insurance policy in respect of the Insured Subordinated Notes are subordinated to claims arising under the insurance policy in respect of the Insured Senior Notes.

Zohar I and Zohar II are debtors in chapter 11 cases currently pending before the Bankruptcy Court for the District of Delaware. The monetization of the Zohar collateral is subject to the terms of a Settlement Agreement between, among other parties, MBIA Corp., the Zohar Sponsor, and the Zohar debtors, which was filed with and approved by the Bankruptcy Court for the District of Delaware presiding over the chapter 11 cases of Zohar I and Zohar II.

The issuance of the New MZF Notes is, except as noted above, on substantially the same terms as the Original MZF Notes, which were described in detail in the Company’s Form 8-K filed on January 10, 2017.

If at the end of any fiscal quarter, MBIA Corp’s “Available Liquidity” (as defined in the Facility) exceeds $100 million and MBIA Corp.’s “Statutory Surplus” (as defined in the Facility) exceeds $250 million, MBIA Corp. will make a payment on the MBIA Loans in the amount by which the Available Liquidity exceeds $100 million. Any repayment of principal on the MBIA Loans during the first 12 months will be subject to a make-whole payment, which effectively ensures that the Senior Lenders are entitled to 12% interest on the entire principal amount of the Insured Senior Notes for one year.At any time that the MBIA Loans are repaid, MZF 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 description of the Facility described herein is qualified by reference to the Exhibits attached hereto.

A copy of each of the following documents, in each case dated as of July 10, 2019, is attached hereto as Exhibits 99.1 through 99.10 and is incorporated herein by reference:

Item 9.01 Financial Statements and Exhibits.

99.4    Form of Amended and Restated $53,836,742.98 12% Subordinated Secured Notes, due January 2022, issued
MBIA INC Exhibit
EX-99.1 2 d95051dex991.htm EX-99.1 EX-99.1 Exhibit 99.1 Execution Version       MZ FUNDING LLC,…
To view the full exhibit click here


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).

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