Bloomberg News

Morgan Stanley Capital Services Withdraws From MBIA Lawsuits

December 15, 2011

(Updates with settlement starting in second paragraph.)

Dec. 15 (Bloomberg) -- Morgan Stanley Capital Services LLC withdrew from lawsuits in New York state court challenging MBIA Inc.’s 2009 restructuring after reaching a settlement with the bond insurer.

Today’s move followed Morgan Stanley’s settling litigation with MBIA on Dec. 13 over credit-default swaps that led to billions of dollars of losses. The bank agreed to terminate the swap contracts and drop its challenge to the insurer’s restructuring.

HSBC Bank USA NA agreed on Dec. 14 to withdraw from two lawsuits in New York State Supreme Court in Manhattan opposing the MBIA restructuring, becoming the fifth plaintiff to drop out of the litigation since August.

Banks including UBS AG and Bank of America Corp. remain plaintiffs in the suits, according to court filings. The banks claimed in their suits that the restructuring of Armonk, New York-based MBIA might leave the insurer unable to pay claims.

More banks or other companies disputing MBIA’s restructuring may drop their lawsuits by the end of the year, Jay Brown, the bond insurer’s chief executive officer, said last month. Banks have discontinued litigation as MBIA negotiates settlements over the credit-default swaps it sold to the lenders to protect against losses on mortgage securities and other debt.

The cases are ABN Amro Bank NV v. MBIA Inc., 601475/2009, and ABN Amro Bank NV v. Dinallo, 601846/2009, New York State Supreme Court (Manhattan).

--Editors: Fred Strasser, Andrew Dunn

To contact the reporter on this story: Chris Dolmetsch in New York at cdolmetsch@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.


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