NEW YORK (Reuters) – Bond insurer MBIA Inc's restructuring during the financial crisis must be annulled because it was based on bad information, a lawyer for banks challenging the restructuring said on Tuesday.
Robert Giuffra, a lawyer for Bank of America Corp and Societe Generale, made the argument in his opening statement in a case the banks brought against MBIA and the state insurance department to overturn the 2009 restructuring.
The reorganization of the Armonk, New York-based bond insurer, once the largest U.S. bond insurer, segregated MBIA's troubled structured-finance business from its traditional municipal bond insurance business.
The banks, which claim they were given no notice of the split, sued MBIA and the New York state insurance department, saying that, as policyholders, they were harmed when $5 billion was siphoned from the MBIA unit that insured mortgage debt.
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