Finally a victory for rating agencies, after a tough couple of weeks. 

[ by Howard Haykin ]

MBIA's major courtroom victory over Bank of America and Societe Generale stands in sharp contrast to the lawsuit pressures faced by rival rating agencies, Standard & Poor's and Moody's. 

S&P and Moody's face high profile lawsuits filed by the Justice Department ($5 billion vs. S&P) and by pension giant CALPERS ($1 billion vs. S&P and Moody's).  The prospects of a 3rd large lawsuit - one that would be filed jointly by the Justice Department and several states - hangs over both S&P and Moody's like a giant storm cloud. 

Mood's Case Dismissed.   In New York State Supreme Court, Justice Barbara Kapnick in Manhattan dismissed the lawsuit filed by the financial behemoths that sought to overturn New York state’s approval of the bond insurer’s 2009 restructuring of $5 billion in assets.  Kapnick’s decision came after a nonjury trial in Manhattan last year. The banks claimed that approval by former NY Insurance Dept Superintendent Eric Dinallo was based on inaccurate and incomplete information provided by Armonk, NY-based MBIA and should be annulled under state laws. 

Following the ruling, MBIA shares skyrocketed, rising 25% by 1:12 p.m. in New York.  It should be noted, however, that Bank of America and Societe Generale have another lawsuit pending against MBIA over the same restructuring in New York state court, using different legal grounds.  Kapnick said today’s decision doesn’t extinguish claims in that case.

This case is ABN Amro Bank v. Dinallo, 601846-2009, New York State Supreme Court (Manhattan).    [Bloomberg, 3/4/13]