retained BarclaysCapital to advise on the prospective sale of the U.K.-based subsidiary ofMBIA Insurance Corp.in a transaction that would advance the bond insurer's efforts to shore up itsclaims-paying resources.
"Thesales process is underway, and we are pleased by the number of parties thathave expressed interest in the company," MBIA Inc. CFO Anthony McKiernansaid during a conference call. "We anticipate the closing the transactionby year end."
MBIACorp. had $278 million in cash and highly liquid assets and $1 billion of cashand investments overall as of March 31. But it continues to face the prospectof a claims payment upon the January 2017 maturity of the Zohar II CDO, forwhich it insures notes totaling $776 million in gross par outstanding.
McKiernanreiterated MBIA Corp.'s belief that there is sufficient value in the Zohar IIcollateral for the notes to ultimately be paid off and the insurer to berepaid, but he said the "issues" for the company surround thespecific magnitude of a claims payment and the potential timing for thoserecoveries. Company officials described the issues surrounding Zohar II asrelating to liquidity, not solvency, and they indicated that they are pursuinga range of options regarding the upcoming maturity.
MBIACorp. carried its 100% stake in MBIA UK (Holdings) Ltd. at its statutory equity value of$389 million, according to Schedule D, Part 6 of its 2015 and the notes to itsaudited statutory financial statements for the year. It represented MBIACorp.'s single-largest investment position, accounting for 48.8% of its Dec.31, 2015, total admitted assets.
MBIAUK issued financial guarantee insurance in the member countries of the EuropeanEconomic Area and other regions outside of the U.S. It had been party to areinsurance agreement with MBIA Corp. that required the U.S. company tomaintain a minimum capital and surplus position at the U.K. company and toreimburse it on an excess-of-loss basis for losses incurred in each calendaryear for net retained insurance liabilities. The companies entered a commutationand release pact during the fourth quarter of 2015 that had the effect ofterminating the support agreements, according to the MBIA Corp. annualstatement.