MBIA Insurance negotiates global settlement with Asian Art Museum
Client(s) MBIA Insurance Corporation
Jones Day represented MBIA Insurance Corporation, National Public Finance Guarantee Corporation and Optinuity Alliance Resources Corporation (together, "MBIA") in the out-of-court restructuring of the Variable Rate Revenue Bonds, Series 2005 of the Asian Art Museum Foundation of San Francisco (the "AAMF"). In 2005, the AAMF issued $120.4 million in variable rate revenue bonds (the "Bonds") to advance refund its fixed rate 2000 bonds. The Bonds, which were insured by MBIA, were supported by a liquidity facility and a swap provided by JPMorganChase Bank ("JPM"). The Bonds were secured by a gross revenue pledge; the museum facilities and art collection are owned by the City and County of San Francisco (the "City") -- a non-obligor under the Bonds.
In September 2010, the AAMF advised MBIA that: (i) its investment portfolio had declined precipitously; (ii) the Bonds' unrestricted net asset covenant would be breached; and (iii) JPM did not intend to renew the letter of credit slated to expire on December 21, 2010. In addition, the AAMF informed MBIA that a bankruptcy filing and liquidation were being considered. With Jones Day's help, MBIA successfully negotiated a standstill agreement with respect to the letter of credit, rapid amortization, the status of the swap collateral, interest rates and interest rate payment dates.
As a result of the standstill, MBIA was able to further engage the parties and negotiate a global settlement by year's end whereby, among other things, the City agreed to an unprecedented guarantee of AAMF's debt, and MBIA was able to exit the transaction. The restructuring was completed in February 2011.