Beleaguered bond insurer MBIA Inc. has settled a lawsuit filed by Aurelius Capital Management over MBIA’s 2009 restructuring. Attorneys for the companies filed a stipulation in federal court in Manhattan on April 11 discontinuing the case. “The settlement of this case is another important step toward resolving all of the litigation contesting our transformation,” MBIA spokesman Kevin Brown said in an e-mailed statement. Details of the settlement were not made public.
The lawsuit, Aurelius Capital Master v. MBIA, 09-2242, alleges that MBIA split itself into a “good” insurer that held onto its municipal bond business and a “bad” insurer that took on its policies on toxic assets. Aurelius alleged the good insurer took $5 billion away from the bad insurer, enriching MBIA’s officers and leaving the bad insurer’s policyholders with no hope of payment.
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