In order to resolve a long-standing litigation, Bank of America (BofA) has agreed to pay US$1.6 billion to MBIA, which will also enable the lender to receive warrants to buy 9.94 million shares, or roughly a 4.9% stake, in the bond insurer.
The warrants can be exercised any time prior to May 2018.
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BofA also plans to remit US$137 million worth of MBIA senior debt it acquired in December and provide MBIA with a US$500 million credit line as part of the settlement.
The settlement came together after MBIA’s board, reportedly, hired Blackstone Group as an adviser.
This deal with MBIA will be BofA chief executive, Brian Moynihan’s, "latest step to fix wide-ranging litigation" related to the financial crisis.
MBIA chief executive, Jay Brown, has called the deal a "significant milestone" for the company.
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By GlobalDataBofA will take a charge of US$1.5 billion, or 10 cents per diluted share, after taxes related to the settlement.
