MBIA Chief Executive Officer Jay Brown said in a statement that changes at the company “should not have been a surprise” and the company would defend the complaint vigorously.
In February, MBIA announced it would place its municipal bond insurance business into a new unit, separate from its structured finance business, in a bid to rebuild operations that were shattered by the subprime mortgage crisis.
Third Avenue said it bought surplus notes issued by MBIA Insurance Corporation in February 2008 based on the entity’s balance sheet. But the bond insurer’s recent decision to transfer about $5 billion in cash and its entire profitable domestic public finance business to the Illinois unit has damaged Third Avenue’s investment in the notes, the firm said.
“We are now being improperly denied the benefit of our investment,” said Whitman, Chairman of the Third Avenue Funds, in a statement. “MBIA has stripped that business away from us and left us with a run-off portfolio that is likely worthless,” Whitman said.
Third Avenue is asking the court to unwind the transfers or award appropriate monetary damages.