California residents with investments in MBIA Corp can be relieved by a 1.5 percent rise in shares on the morning of Thursday, May 23, despite overall depressed markets.
The rise in stock prices followed news of Ally Financial Inc.'s agreement to pay a $2.1 billion settlement to Residential Capital LLC. Ally, formerly General Motors Acceptance Corporation, had filed another settlement last year and received objections from MBIA Corp and others.
In the business dispute, residential mortgage-backed securities or RMBS investors were left with an $8.7 billion claim against the bankrupt Residential Capital. Creditors including MBIA Corp complained that this high amount would hinder their abilities to recover. The settlement agreed to on May 23 will decrease these claims by $1.4 billion. Creditors objecting to the original settlement also complained that it was controlled by Ally, which would have received shielding from claims as a result.
Although the agreement still requires court approval, it maintains the support of MBIA Corp and other major creditors. The timeline for full resolution remains unknown as does a time frame for court approval.
Many California businesses experience sticky investment and legal situations from time to time. Financial problems can result in a breach of contract, or a business may find itself in the midst of a corporate dispute of one kind or another. Businesses of all sizes often benefit from keeping a lawyer on retainer. When business matters become complicated, a business attorney can often assist by providing simple contract reviews or by providing further legal information and advice.
Source: Fox Business, "Ally to pay $2.1 billion to settle ResCap litigation", Tom Hals, May 23, 2013