Bank of America Corp. raised the stakes in its ongoing legal battle with bond insurer MBIA Inc. on Thursday, saying MBIA was in default on some of its debt and filing a lawsuit related to changes in that debt, Reuters reported yesterday. Bank of America said that it purchased $136 million worth of the 5.70 percent senior notes due in 2034 in a tender offer and that it had issued a notice of default to the company and the trustee for the notes. According to Thomson Reuters data, there are $329.1 million in notes outstanding from the bond issue in question. Bank of America also filed suit against MBIA in a New York state court, alleging that MBIA interfered in Bank of America's offer to buy the bonds. At issue is a change MBIA sought to make to the terms of the bonds to eliminate the risk that it might be considered in default if a troubled unit were put into rehabilitation or liquidation by New York regulators. MBIA said in early November that if there were a default, it would have insufficient liquidity to make good on the notes and would probably pursue other actions, including bankruptcy. Bank of America countered with an offer to buy the bonds, saying it believed the changes would increase the risk of MBIA's insurance unit being placed in rehabilitation or liquidation, which could jeopardize all policyholder claims.
