Event Publicly Available Information:
The Reference Entity, according to a public filing made by its parent MBIA Inc. on September 29th, 2016, had outstanding Obligations consisting of financial guaranty insurance on $772 million principal amount of notes issued by Zohar II 2005-1 CLO maturing on January 20, 2017 (the “Zohar Notes”). The public filing detailed steps that the Reference Entity was taking to meet those Obligations which included engaging in financing transactions and selling its UK insurance subsidiary (along with some cash consideration) in exchange for $347 million of the Zohar Notes. A January 10, 2017 MBIA Inc. public filing disclosed that regulatory approval for those transactions had been received and as a result approximately $366 million in financing had been received and $347 million on Zohar Notes were acquired by MBIA UK (Holdings) Limited, a subsidiary of the Reference Entity domiciled in the United Kingdom.
According to the public filing, the Reference Entity believes that the $366 million in financing, along with $60 million from its own resources and the acquisition of $347 million of the Zohar Notes will enable the Reference Entity to satisfy the Obligations which became due on January 20, 2017. However, the Reference Entity has not indicated how this is being effected, since the total amount of cash raised from the financing and the use of its own resources totals only $426 million, which is less than the $772 million face amount of the Zohar Notes covered by the Obligations and approximately equal to only the amount of the Zohar Notes held by parties other than MBIA UK (Holdings) Limited. Notably, the Reference Entity has not publicly indicated how it will satisfy the Obligations relating to the $347 million of Zohar Notes held by its foreign subsidiary. Those Obligations were payable on January 20, 2017 and if they have not been satisfied on that date or since, then a Failure to Pay Credit Event has occurred.
Accordingly, we request that the Committee consider whether a Failure to Pay Credit Event has occurred with respect to the Reference Entity.
Form 8-K dated September 29, 2016
Form 8-K dated November 28, 2016
Form 8-K dated January 10, 2017