8-K

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d)

of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): November 28, 2016 (November 25, 2016)

MBIA INC.

(Exact name of registrant as specified in its charter)

Connecticut	1-9583	06-1185706
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)

1 Manhattanville Road, Suite 301 Purchase, New York	10577
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code:

914-273-4545

Not Applicable

(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K filing is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

☐ Written communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

☐ Soliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

☐ Pre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

☐ Pre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01 ENTRY INTO A MATERIAL DEFINITIVE AGREEMENT.

Financing Commitment for MBIA Insurance Corp.

MBIA Inc. (the “Company”) today announced that its wholly-owned subsidiary, MBIA Insurance Corp. (“MBIA Corp.”), has accepted a binding commitment letter dated November 25, 2016, with certain holders (the “Holders”) of 14% Fixed-to-Floating Rate Surplus Notes of MBIA Corp., and with the Company, pursuant to which the Holders or their affiliates (collectively, the “Senior Lenders”) have agreed to provide senior financing and the Company has agreed to provide subordinated financing (the Senior Lenders and the Company being referred to herein as, the “Lenders”) in the amounts and on the terms described below to MBIA Corp. MBIA Corp. will use the net proceeds of the financing to pay an anticipated claim (the “Zohar II Claim”) on its insurance policy (the “Zohar II Policy”) insuring certain notes (the “Zohar II Notes”) issued by Zohar II 2005-1 Limited and Zohar II 2005-1 Corp. (“Zohar II”) on January 20, 2017 (the “Zohar Maturity Date”). The closing of the financing is subject to, among other things as described below, MBIA Corp. acquiring Zohar II Notes with an outstanding principal amount of $347 million from Assured Guaranty (such Zohar II Notes, the “Assured Zohar II Notes”) pursuant to the Share Purchase Agreement dated as of September 29, 2016 (the “SPA”) by and between MBIA UK (Holdings) Limited (“MBIA UK Holdings”) and Assured Guaranty Corporation (“Assured”). Under the SPA, MBIA UK Holdings agreed to exchange its shares of MBIA UK Insurance Limited (“MBIA UK”) plus $23 million in cash for the Assured Zohar II Notes (the “Sale Transaction”). The Sale Transaction is subject to certain closing conditions, including the receipt of regulatory approvals from the Prudential Regulation Authority, the Financial Conduct Authority of the United Kingdom, the New York State Department of Financial Services (“NYSDFS”) and the Maryland Insurance Administration.

In connection with the financing, a bankruptcy remote special purpose entity (“NewCo”) will be organized to act as the direct borrower from the Senior Lenders and from the Company. The Senior Lenders will purchase senior notes issued by (or make senior loans to) NewCo (the “Insured Senior Notes”) with an aggregate principal amount of up to $325 million, and the Company will purchase subordinated notes issued by (or make subordinated loans to) NewCo (the “Insured Subordinated Notes” and together with the Insured Senior Notes, the “NewCo Notes”) with an aggregate principal amount of $38 million. The NewCo Notes and the MBIA Corp. Policies (defined below) will not be subject to any transfer restrictions. The Company will also commit to purchase up to an additional $50 million principal amount of Insured Subordinated Notes from NewCo (the “Additional Subordinated Notes” ), if needed by MBIA Corp. to provide additional liquidity to MBIA Corp. to pay claims or for other purposes. The Company currently owns Zohar II Notes with an outstanding principal amount of $38 million, which the Company expects to be paid on the Zohar Maturity Date, subject to the consummation of the financing contemplated under the Facility (as defined below).

NewCo will enter into a loan agreement with MBIA Corp. (the “MBIA Loan Agreement”; and the loans thereunder, the “MBIA Loans”) pursuant to which it will immediately lend the proceeds of any NewCo Notes to MBIA Corp. MBIA Corp. will issue financial guaranty insurance policies (the “MBIA Corp. Policies”) insuring scheduled payments on the Insured Senior Notes and Insured Subordinated Notes. The NewCo Notes and the MBIA Loans are referred to herein as the “Facility.”

MBIA Corp. will use the net proceeds of the loans made under the MBIA Loan Agreement on the closing date of the Facility, together with approximately $60 million from its own resources (the “MBIA Corp. Payment”), to pay the Zohar II Claim on the Zohar Maturity Date. The MBIA Corp. Payment and the amount of the Insured Senior Notes will be reduced by any cash proceeds received by MBIA Corp. prior to the closing of the Facility from the auction of the assets owned by Zohar CDO 2003-1, Limited (“Zohar I”), which is scheduled to be completed by December 3, 2016. There is no assurance that such auction will be completed by such date or that MBIA Corp. will receive any cash proceeds from the auction.

The Facility will be secured by a first priority security interest in all of MBIA Corp.’s right, title and interest in (1) MBIA Corp.’s rights to reimbursement, recovery, salvage or subrogation with respect to the claim it paid under its policy insuring the class A-1 and A-2 notes (the “Zohar I Notes”) issued by Zohar I, (2) MBIA Corp.’s Zohar I Notes and related subrogation rights, (3) MBIA Corp.’s rights to reimbursement, recovery, salvage or subrogation with respect to any claim paid by MBIA Corp. under its policy insuring the Zohar II Notes, (4) MBIA Corp.’s Assured Zohar II Notes and related subrogation rights, (5) MBIA Corp.’s rights as a party to, or third-party beneficiary under, any Zohar I or Zohar II indenture, supplemental indenture, insurance and indemnity agreement or other legal documentation, (6) any other rights or remedies inuring to the benefit of MBIA Corp. in connection with Zohar I or Zohar II, whether arising under contract or tort, and (7) with respect to (1)-(6) above, any recoveries MBIA Corp. acquires from any source in connection with such rights (collectively, including any proceeds thereof, the “Collateral”).

The Insured Senior Notes will have a first lien on the Collateral, and the Insured Subordinated Notes will have a second lien on the Collateral. Any amounts due the Company in respect of the Insured Subordinated Notes or from the MBIA Corp. Policies insuring the Insured Subordinated Notes will be subordinated to payment in full of the Insured Senior Notes until the amounts owed to the Senior Lenders in respect of the Insured Senior Notes have been paid in full.

The NewCo Notes and the MBIA Loans will mature on January 20, 2020 and will bear interest at 14% per annum, payable quarterly in arrears. Interest on the NewCo Notes will be payable in cash, but may be payable in kind at the option of MBIA Corp. to the extent that recoveries on the Collateral and the Cash Sweep (referred to below) is less than the accrued but unpaid interest.

If at the end of any fiscal quarter, MBIA’s “Available Liquidity” (as defined in the Facility) exceeds $150 million and MBIA Corp.’s “Statutory Surplus” (as defined in the Facility) exceeds $250 million, MBIA Corp. will make a payment on the MBIA Loans in the amount by which the Available Liquidity exceeds $150 million, except that during the first 18 months after the closing of MBIA Loans, the payment will be limited to the amount of the accrued but unpaid interest. This payment, which is referred to as the “Cash Sweep,” will be subject to approval, or non-disapproval, of the NYSDFS. Also, MBIA Corp. will be required to apply any recoveries in respect of the Collateral to the repayment of the MBIA Loans, except that during the first 18 months after closing of the MBIA Loans, MBIA Corp. may elect to place the amount of any

recovery in excess of accrued interest in an interest bearing account subject to the liens in favor of the Senior Lenders in lieu of the payment of principal on the MBIA Loans. Any repayment of principal on the MBIA Loans during the first 18 months will be subject to a declining make-whole payment, calculated as a percentage of the principal amount being repaid. At any time that the MBIA Loans are repaid, NewCo is required to apply the repayment first to the payment of interest and principal on the Insured Senior Notes and, after the Insured Senior Notes are paid in full, to the payment of the Insured Subordinated Notes, subject to certain reimbursements payable to MBIA Corp.

The issuance of the NewCo Notes will be subject to satisfaction of certain conditions including, but not limited to, (i) consummation of the Sale Transaction; (ii) receipt of any required regulatory approvals; (iii) that neither the Company nor MBIA Corp. has entered into a bankruptcy or rehabilitation or similar proceeding; (iv) no new information shall have been obtained by or made reasonably available to the Senior Lenders, and no fact, condition or event shall occur or exist, that would, individually or in the aggregate, reasonably be expected to (a) result in, or constitute, a material adverse effect on MBIA Corp., Zohar I or Zohar II or the Collateral or (b) indicate that the Collateral would reasonably be expected to be inadequate to secure the repayment of the Facility; (v) no new evidence of intentional fraud of Zohar I or Zohar II, or of related persons in respect thereof; (vi) if the sale of Zohar I assets is completed before funding, the sum of all accepted credit bids by MBIA and successful cash bids must equal or exceed the size of MBIA’s claim against Zohar I; (vii) execution of final documentation; and (viii) closing of the transaction no later than January 20, 2017.

The Facility will contain customary and other representations and warranties and affirmative, negative and financial covenants and events of default.

MBIA Corp. has agreed to pay a commitment fee to the Senior Lenders, a portion of which may be financed by the issuance of additional Insured Senior Notes. MBIA Corp. has also agreed to pay a termination fee to the Senior Lenders in the event the amount of the Insured Senior Notes issued is less than $325 million, or if the commitment of the Senior Lenders is terminated, including for failure of the parties to agree on definitive documentation after good faith negotiations. Closing of the Facility is expected to occur no earlier than January 1, 2017 and no later than January 20, 2017.

Management of the Company and MBIA Corp. believe that the closing of the Facility and the Sale Transaction, together with the MBIA Corp. Payment, will enable MBIA Corp. to successfully address its insurance obligations relating to the Zohar II Policy. There is no assurance, however, that closing of the Facility or the Sale Transaction will be consummated. If the closing of the Facility and the Sale Transaction are not consummated, MBIA Corp. will not have sufficient liquid assets to pay the Zohar II Claim. If the NYSDFS concludes at any time that the closing of the Facility or the Sale Transaction will not be consummated and that MBIA Corp. will not be able to restructure or otherwise satisfy its obligations under the Zohar II Notes on terms satisfactory to the NYSDFS, while maintaining sufficient assets to readily pay other policyholder claims, the NYSDFS would likely put MBIA Corp. into a rehabilitation or liquidation proceeding under Article 74 of the New York Insurance Law (“NYIL”) and/or take such other actions as the NYSDFS may deem necessary to protect the interests of MBIA Corp.’s policyholders. The determination to commence such a proceeding or take other such actions is within the exclusive control of the NYSDFS. The NYSDFS enjoys broad discretion in this regard, and any determination they may make would not be limited to consideration of the matters described above. No assurance is given as to what action, if any, the NYSDFS may take.

MBIA Corp. is engaged in preliminary contingency planning discussions with the NYSDFS with respect to a potential rehabilitation proceeding in the event that the closing of the Facility and the Sale Transaction cannot be consummated or if it cannot otherwise restructure the Zohar II Notes.

Given the separation of the Company and MBIA Corp. as distinct legal entities, the absence of any material intercompany lending agreements or cross defaults between the entities, and the lack of reliance by the Company on MBIA Corp. for the receipt of dividends, neither the Facility nor the Sale Transaction are expected to have a material impact on the Company’s financial position and results of operations. The Company concluded, however, that from an investment perspective the return and risk profile of the subordinated financing to be provided by the Company were acceptable, taking into account the economic terms of and substantial level of collateral that will secure the subordinated financing provided by the Company and the expected payment at maturity of the Zohar II notes owned by the Company, and that it was in the Company’s interest to purchase the Insured Subordinated Notes and, if needed, the Additional Subordinated Notes for the purposes described above. There is no assurance that the Company will provide any financing to MBIA Corp. in addition to the financing that Company has agreed to provide under the Facility, and no such additional financing is contemplated. Any evaluation by the Company whether to provide any additional financing to MBIA Corp. in the future will depend on the circumstances at the time and an analysis by the management and board of directors of the Company whether any such additional financing is in the best interest of the Company and its stockholders.

Promptly following the maturity of the Zohar II Notes, MBIA Corp. will evaluate strategic options and potential transactions that would maximize present value creation for the holders of its Surplus Notes. MBIA Corp. would seek to implement any such option that it deems reasonably appropriate in a timely manner while continuing to meet its obligations to all of its policyholders. There can be no assurance MBIA Corp. will engage in any such transaction.

A copy of the press release issued by the Company, dated November 28, 2016, is attached hereto as Exhibit 99.1 and is incorporated herein by reference.

In connection with their evaluation of the Facility, the Senior Lenders were provided with a presentation containing certain information about MBIA Corp. and the Collateral, which is attached hereto as Exhibit 99.2 and is incorporated herein by reference.

Item 9.01. FINANCIAL STATEMENTS AND EXHIBITS.

99.1 Press Release issued by MBIA Insurance Corporation, dated November 28, 2016.

99.2 Presentation containing certain information about MBIA Corp. and the Collateral

Forward-Looking Statements

The information contained in this Current Report should be read in conjunction with our filings made with the Securities and Exchange Commission. This report includes statements that are not historical or current facts and are “forward-looking statements” made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The words “believe,” “anticipate,” “project,” “plan,” “expect,” “intend,” “will likely result,” “looking forward” or “will continue,” and similar expressions identify forward-looking statements. These statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical earnings and those presently anticipated or projected, including, among other risks and uncertainties, the possibility that the Company will experience increased credit losses or impairments on public finance obligations we insure issued by state, local and territorial governments and finance authorities that are experiencing unprecedented fiscal stress, the possibility that MBIA Insurance Corporation will have inadequate liquidity to pay expected claims as a result of increased losses on certain structured finance transactions, in particular residential mortgage-backed securities transactions that include a substantial number of ineligible mortgage loans, or a delay or failure in collecting expected recoveries, the possibility that loss reserve estimates are not adequate to cover potential claims, a disruption in the cash flow from our subsidiaries or an inability to access capital and our exposure to significant fluctuations in liquidity and asset values within the global credit markets as a result of collateral posting requirements, our ability to fully implement our strategic plan, including our ability to maintain high stable ratings for National Public Finance Guarantee Corporation and generate investor demand for our financial guarantees, deterioration in the economic environment and financial markets in the United States or abroad, and adverse developments in European sovereign credit performance, real estate market performance, credit spreads, interest rates and foreign currency levels, the effects of governmental regulation, including insurance laws, securities laws, tax laws, legal precedents and accounting rules; and uncertainties that have not been identified at this time. These and other factors that could affect financial performance or could cause actual results to differ materially from estimates contained in or underlying the Company’s forward-looking statements are discussed under the “Risk Factors” section in MBIA Inc.’s most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q, which may be updated or amended in the Company’s subsequent filings with the Securities and Exchange Commission. The Company cautions readers not to place undue reliance on any such forward-looking statements, which speak only to their respective dates. The Company undertakes no obligation to publicly correct or update any forward-looking statement if it later becomes aware that such result is not likely to be achieved.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized.

MBIA INC.
By:	/s/ Ram D. Wertheim
	Ram D. Wertheim
	Chief Legal Officer

Date: November 28, 2016

EXHIBIT INDEX TO CURRENT REPORT ON FORM 8-K

Dated November 28, 2016

99.1 Press Release issued by MBIA Insurance Corporation, dated November 28, 2016.

99.2 Presentation containing certain information about MBIA Corp. and the Collateral

EX-99.1

Exhibit 99.1

MBIA Insurance Corporation.

1 Manhattanville Road, Suite 301

Purchase, NY 10577

www.mbia.com

NEWS RELEASE

MBIA Inc. Announces Financing Commitment for MBIA Insurance Corporation

PURCHASE, N.Y.—(BUSINESS WIRE)—MBIA Inc. (NYSE:MBI) (the Company) today announced that its wholly-owned subsidiary, MBIA Insurance Corp. (MBIA Corp.), has accepted a binding commitment letter dated November 25, 2016, from certain holders of 14% Fixed-to-Floating Rate Surplus Notes of MBIA Corp., and from the Company, pursuant to which the surplus noteholders or their affiliates have agreed, subject to the satisfaction of certain closing conditions, to provide senior financing of up to $325 million and the Company has agreed to provide subordinated financing of $38 million to MBIA Corp. (the Facility). MBIA Corp. will use the proceeds of the Facility, together with approximately $60 million from its own resources, to pay an anticipated claim on its insurance policy insuring certain notes (Zohar II Notes) issued by Zohar II 2005-1, Limited and Zohar II 2005-1 Corp. (Zohar II), which mature on January 20, 2017. In addition to the $38 million of subordinated financing to be provided by the Company described above, the Company has agreed to provide up to an additional $50 million of subordinated financing to MBIA Corp. under the Facility, if needed, to provide additional liquidity to MBIA Corp. The Facility will be secured by MBIA Corp.’s rights to reimbursement and recovery with respect to the claim it paid under its policy insuring the class A-1 and A-2 notes issued by Zohar CDO 2003-1, Limited Zohar I, and its rights to reimbursement and recovery with respect to any claim paid under its policy insuring the Zohar II Notes.

Anthony McKiernan, MBIA Corp.’s President and Chief Financial Officer noted, “This financing, together with MBIA Corp.’s acquisition of the Zohar II Notes from Assured and the use of its own resources, will enable MBIA Corp. to satisfy its obligations on the Zohar II Notes on January 20, 2017. The Zohar I Notes defaulted in November 2015 and the Zohar II Notes are expected to default in January, which represents approximately $1.3 billion in defaulted Zohar notes. We remain prepared to work with Patriarch Partners and the collateral manager of the Zohar entities to institute a transparent and comprehensive plan to sell or refinance the assets owned by the Zohar entities in an orderly manner to ensure that their obligations are fully satisfied. While we believe that a consensual approach is preferable and in the interest of all parties, in the absence of the implementation of a good faith plan, we will continue to aggressively seek to enforce our rights to the full reimbursement of the insurance claims we paid.”

The Company currently owns Zohar II Notes with an outstanding principal amount of $38 million, and expects those notes to be paid in full on the maturity date, subject to consummation of the Facility. The Company concluded that, from an investment perspective, the return and risk profile of the subordinated financing it has agreed to provide were acceptable, taking into account the economic terms of the financing, the substantial level of collateral that will secure the financing and the expected payment at

maturity of the Zohar II Notes it owns, and that it was in the Company’s interest to provide the subordinated financing described above in order to enable MBIA Corp. to pay its obligations under the Zohar II Notes insurance policy and to provide additional liquidity to MBIA Corp.

The closing of the Facility and of the sale of MBIA UK Insurance Limited (MBIA UK) are expected to enable MBIA Corp. to successfully address its insurance obligations relating to its insurance policy insuring the Zohar II Notes. The closing of the Facility is subject to specified conditions, including, but not limited to, MBIA Corp. acquiring the Zohar II Notes with an outstanding principal amount of approximately $347 million from Assured Guaranty Corp. in connection with the sale of MBIA UK, as previously disclosed; receipt of any required regulatory approvals from the New York State Department of Financial Services; and the execution of final documentation. The closing of the Facility is expected to occur no later than January 20, 2017. There is no assurance, however, that the conditions precedent to the closing of the Facility or to the sale of MBIA UK will be satisfied and that such transactions will be consummated.

The material terms of the Facility and the potential consequences of the failure to consummate the closing of the Facility or the sale of MBIA UK are described in the Form 8-K filed by the Company today with the Securities Exchange Commission and which is also available on the Company’s web site at www.mbia.com.

Forward-Looking Statements

The information contained in this press release should be read in conjunction with our filings made with the Securities and Exchange Commission. This release includes statements that are not historical or current facts and are “forward-looking statements” made pursuant to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. The words “believe,” “anticipate,” “project,” “plan,” “expect,” “estimate,” “intend,” “will likely result,” “looking forward” or “will continue,” and similar expressions identify forward-looking statements. These statements are subject to certain risks and uncertainties that could cause actual results to differ materially from historical earnings and those presently anticipated or projected, including, among other risks and uncertainties, the possibility that the Company will experience increased credit losses or impairments on public finance obligations we insure issued by state, local and territorial governments and finance authorities that are experiencing fiscal stress, the possibility that MBIA Corp. will have inadequate liquidity to pay claims as a result of increased losses on certain structured finance transactions, in particular residential mortgage-backed securities transactions that include a substantial number of ineligible mortgage loans, or a delay or failure in collecting expected recoveries, the possibility that loss reserve estimates are not adequate to cover potential claims, a disruption in the cash flow from our subsidiaries or an inability to access capital and our exposure to significant fluctuations in liquidity and asset values within the global credit markets as a result of collateral posting requirements, our ability to fully implement our strategic plan, including our ability to maintain high stable ratings for National and generate investor

demand for our financial guarantees, deterioration in the economic environment and financial markets in the United States or abroad, and adverse developments in European sovereign credit performance, real estate market performance, credit spreads, interest rates and foreign currency levels, the effects of governmental regulation, including insurance laws, securities laws, tax laws, legal precedents and accounting rules; and uncertainties that have not been identified at this time. These and other factors that could affect financial performance or could cause actual results to differ materially from estimates contained in or underlying the Company’s forward-looking statements are discussed under the “Risk Factors” section in MBIA Inc.’s most recent Annual Report on Form 10-K and Quarterly Report on Form 10-Q, which may be updated or amended in the Company’s subsequent filings with the Securities and Exchange Commission. The Company cautions readers not to place undue reliance on any such forward-looking statements, which speak only to their respective dates. The Company undertakes no obligation to publicly correct or update any forward-looking statement if it later becomes aware that such result is not likely to be achieved.

MBIA Inc. is a holding company whose subsidiaries provide financial guarantee insurance for the public and structured finance markets. Please visit MBIA’s website at www.mbia.com.

Contact

MBIA Inc.

Greg Diamond, 914-765-3190

Investor and Media Relations

greg.diamond@mbia.com

EX-99.2

Project Phantom ZOHAR COLLATERAL OVERVIEW NOVEMBER 2016 Exhibit 99.2

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Pro Forma for the MBIA UK transaction, MBIA Inc. and MBIA Insurance Corp. (“MBIA Corp.”) will together hold approximately $385mm (1) of the approximately $770mm Zohar II notes due January 20, 2017 that MBIA Corp. insured (“Zohar II Notes”) In connection with the approximately $385mm remaining Zohar II Notes, MBIA Corp. is seeking up to $325mm of financing (“Insured Senior Notes”) to help potential liquidity needs The financing enables MBIA Corp. to pay claims at maturity on its policy insuring the Zohar II Notes that are outstanding and secured by Zohar II collateral MBIA Corp. will pay from its own resources the balance of the approximately $385mm claim (“MBIA Corp. Payment”), or roughly $60mm MBIA Corp. proposes to secure the Insured Senior Notes with all of its rights to the Zohar I and Zohar II collateral, provided that the MBIA Corp. Payment will be secured by MBIA Corp’s rights to the Zohar II collateral on a pari passu basis MBIA Inc. will also finance $38mm, and will commit to finance up to an additional $50mm, in exchange for Insured Subordinated Notes The Zohar I and Zohar II collateral consists of debt, preferred stock and common stock and/or other equity interests in approximately 64 companies (3). Based on our preliminary analysis of the top 11 companies (the “Top 11”), there appears to be sufficient asset coverage for the Insured Senior Notes. The following represents an estimate of potential recoveries on Zohar I and Zohar II and does not take into account legal risks with respect to the rights of MBIA Corp. or the Zohar funds Executive Summary Source: Management Discussion $770mm of Zohar II Gross Par Outstanding less ~$38mm of MBIA Inc.-owned Zohar II notes and ~$347mm of Assured Guarantee’s Zohar II notes (“Assured Notes”) Houlihan Lokey’s illustrative valuation range is based upon applying TEV/EBITDA multiples of relevant public comparables to each of the Top 11 companies Patriarch Presentation to Moody’s (July 1, 2009) , Trustee Notice of Public Sale of Zohar I Collateral (October 24, 2016) Zohar I & II Collateral Recovery – Top 11(2) ($ in millions) Low Range Zohar I & II Recovery – Top 11(2) High Range Zohar I & II Recovery – Top 11(2) $385mm $385mm ($ in millions) ($ in millions)

Transaction Diagram Insured Senior Lenders MBIA Insurance Corp. “MBIA Corp.” Zohar II Notes Outstanding Assured Guaranty Corp. MBIA UK (Divested) MBIA Corp. has agreed to sell its MBIA UK Subsidiary and provide $23 million in cash to Assured Guaranty Corp. in exchange for $347mm outstanding principal amount of Zohar II Notes NewCo will be organized to act as the direct borrower from the Lenders Insured Senior Lenders lend $325mm to NewCo in exchange for Insured Senior Notes (insured by a new policy written by MBIA Corp.) MBIA Inc. lends $38mm to NewCo in exchange for Insured Subordinated Notes (insured by a new policy written by MBIA Corp.). MBIA Inc. also commits to lend up to an additional $50mm to NewCo in exchange for additional Insured Subordinated Notes if MBIA Corp. needs more liquidity. NewCo will immediately on-lend the proceeds of the loan to MBIA Corp. pursuant to a credit facility (the “Facility”) secured by all of MBIA Corp.’s rights in connection with Zohar I and II MBIA Corp. uses the Facility and roughly $60mm from its balance sheet (“MBIA Corp. Payment”) to pay the outstanding claims of the Zohar II Notes Special Purpose Entity “NewCo” MBIA Inc. “Insured Subordinated Lenders” $325mm $38mm (and up to $50mm more) $363mm Facility $347mm Zohar II Notes MBIA Corp. Payment & $363mm Facility Set forth below is a summary description of the contemplated transaction and an illustrative diagram Insured Sr. Notes Insured Sub. Notes

Balance Sheet Update – Q3 2016 Results Set forth below is MBIA Corp.’s balance sheet as of Q3 2016 Source: MBIA Inc. As of September 30, 2016 and December 31, 2015, the discount rate was 5.18%

Income Statement Update – Q3 2016 Results Set forth below is MBIA Corp.’s income statement as of Q3 2016 Source: MBIA Inc.

Reserve Statistics – 3Q 2016 Results Source: MBIA Inc. Excludes the non-admitted portion of MBIA UK's ending equity of $125 million and $75 million, as of September 30, 2016 and December 31, 2015, respectively As of September 30, 2016 and December 31, 2015, the discount rate was 5.18% The amounts consist of Financial Guarantee insurance premiums and Insured Credit Derivative revenue Set forth below are reserve statistics as of Q3 2016

The Reserve Case is the scenario used for the purpose of setting MBIA Corp.’s loss reserves and is based on a probability weighted average of three scenarios of loan losses (base case, stress case, and an extended stress case) The Hypothetical Downside Case was prepared by MBIA Corp. and shows a more draconian projection. The Hypothetical Downside Case stresses all distressed holdings over three years, excluding Zohar II, and then solves for the total losses MBIA Corp. could absorb from Zohar II, while maintaining adequate statutory capital and liquidity Based on this aggressive downside scenario, MBIA Corp. could sustain significant loss on a net present value basis on the Zohar II collateral The cash flow forecasts show that if the remaining Zohar II notes are refinanced, MBIA Corp. will have sufficient cash flow and regulatory capital(1) MBIA Corp.’s cash flow model also assumes recovery from (i) the Credit Suisse put-back litigation(2) based on a probability weighted outcome, (ii) the Zohar I collateral, and (iii) the Zohar II collateral The company stresses its reserve assumptions (detailed below) to varying degrees based on each scenario MBIA Corp. Cash Flow / Reserve Forecast Houlihan Lokey has analyzed MBIA Corp.’s cash flow forecast under two primary scenarios: (1) Reserve Case and (2) Hypothetical Downside Case Key Drivers Credit Suisse Put-Back Recoverable (2) (3) Expected Recovery The company recorded estimated recoveries of $406 million on its statutory balance sheet. The company believes it will prevail in enforcing its contractual rights and that it is entitled to collect up to the full amount of its incurred losses, which totaled $432 million through September 30, 2016, excluding interest on amounts paid, as per the 10Q. Adding statutory interest to the maximum recovery amount would entitle the company to approximately $680-700 million. However, the company model assumes a settlement is the likeliest outcome of the litigation. Kramer Levin believes, based on a review of publicly available information, the company’s estimated recovery on its statutory balance sheet is a reasonable potential outcome of the litigation. First Lien & Second Lien (3) Loss Severities Historical average is reduced over time to account for reductions in the amount of foreclosure inventory, anticipated future increases in home prices, principal amortization of the loans and modification programs Prepayments Historical average of deal specific voluntary prepayment rates CDO (4) Loss Severities Each transaction is evaluated for its commutation potential, which is customized by counterparty and considers historical commutation prices, the level of dialogue with the counterparty and the credit quality and payment profile of the underlying exposure A range of loss scenarios is considered under different default and severity rates for each transaction’s collateral Zohar I & II The company expects recovery for Zohar I & Zohar II collateral Source: Company Filings, Management Discussion The company did not account for interest when solving for total losses MBIA Corp. could absorb, and it also assumed cash outflows due to Zohar II claims would be at par rather than a discount Unsettled claim remaining with Credit Suisse related to inclusion of ineligible mortgage loans in a RMBS. Credit Suisse has challenged the company’s assessment of the ineligibility of individual mortgage loans and the dispute is the subject of litigation 3Q 2016 10-Q 2015 10-K, p.110

180’s LLC American Doors, LLC Acme International Enterprises, Inc. American LaFrance LLC Amweld International Arizona Beverage Acquisition, LLC Automated Ductwork Manufacturing Company Best Textiles Acquisition, LLC Bomar Industries International Inc. CBA Group, LLC Croscill Acquisition, LLC Denali Incorporated Duro Textiles, LLC East Alliance Limited ElectroSource, LLC eMag Solutions, LLC Felagastyring EHF Fetco Home Décor, Inc. Galey & Lord, LLC Glenoit, LLC Global Automotive Systems, LLC Jacobs Industries, LLC Zohar CDO Holdings Hartwell Industries, Inc. Heritage Aviation HVEASI Holding BV(2) HyperActive Technologies, Inc. Iconic American Trucks IMG Holdings, Inc. Intera Group, Inc. Intrepid Healthcare LVD Acquisition, LLC MD Helicopters, Inc. Metalforming Technologies, Inc. Natura Water, Inc. Netversant Acquisition, LLC Opening Specialties and Supply Inc. Petry Media Corporation Pleasents Hardware Company PVI Acquisition, LLC RM Acquisition, LLC Rapid Rack Industries, Inc. Red Shield Acquisition, LLC Remco Maintenance, LLC RM Acquisition, LLC Set forth below are Zohar CDO debt and/or equity holdings disclosed in public documents(1) Source: Patriarch Presentation to Moody’s (July 1, 2009), Trustee Notice of Public Sale of Zohar I Collateral (October 24, 2016) Patriarch’s Presentation to Moody’s includes companies in which Zohar I, Zohar II, and Zohar III had either equity or other interests in 2009, and thus may be under or over inclusive This company, which was sold in 2012, was listed on various spreadsheets reflecting equity held by Zohar II. See “Introduction to Patriarch Partners” Presentation, dated Feb. 2007 at 42 (stating that Zohar II owns 100% of equity in Obligor 21—ASI). However, the former collateral manager has offered testimony in a Delaware litigation that this inclusion was in error, and the proceeds of the sale of the company did not flow to Zohar II, but instead flowed to Ms. Tilton. See Trial Tr. (8/10/16) at 538:2-541:14 in Zohar v. Patriarch, 12247-VCS (Del. Ch.). Information sufficient to confirm or deny this assertion has not been made available S.O. Acquisition, LLC Signature Styles, LLC Silverack, LLC Snelling Medical Staffing Stila Styles, LLC TransCare Corporation Trim Trends Holdings, LLC Spectrum International Holdings Snelling Medical Staffing Textile Holdings U.F. Holdings, Inc. UI Acquisition Holding Company Vulcan Engineering Co. Vorumerkjastyring EHF W.W. Holdings, LLC Western Forest Products, Inc. W.W. Versat Acquisition Corporation Xinhua Sports & Entertainment Xpient Solutions, LLC Zohar SS Acquisition

Houlihan Lokey and Kramer Levin Naftalis & Frankel LLP (“Counsel”) performed the following diligence, which was limited by various constraints highlighted on the next slide and was therefore not subject to a usual degree of diligence verification The diligence process included discussions with MBIA, MBIA Corp.’s counsel and other advisors, and the current Collateral Manager of Zohar I and II Houlihan Lokey and Counsel reviewed materials in the following categories regarding the Zohar I and Zohar II assets, all of which were obtained from MBIA Corp. or its representatives, pursuant to non-disclosure agreements, or the public domain: Certain transaction documents and other documents relating to the collateral held by Zohar I and II in the portfolio companies Presentations, marketing materials, and other admissions by Patriarch Partners Zohar I Auction Notice and WSJ Advertisement (lists collateral in Zohar I held by the Zohar I Trustee) Certain court filings and testimony in various litigations including: Zohar CDO 2003-1, LLC v. Patriarch Partners, LLC, C.A. No. 12247-VCS (Del. Ch. Ct.) (Document Production Litigation) Patriarch Partners XV, LLC v. U.S. Bank, N.A., No. 654819/2016 (S.D.N.Y.) (Auction Litigation) In re Zohar CDO 2003-1, No. 15-23680, 15-23681, 15-23682 (RDD) (Bankr. S.D.N.Y.) (Zohar I Bankruptcy) In the Matter of Lynn Tilton and Patriarch Partners, No. 3-16462 (SEC Administrative Proceeding) Tilton v. Securities and Exchange Commission, No. 16-cv-7408 (S.D.N.Y.) (Challenge to SEC Proceeding) MBIA Ins. Corp. v. Patriarch Partners VIII, LLC, No. 09-cv-3255 (RWS) (S.D.N.Y.) (B Note Litigation) Houlihan Lokey also received an update from MBIA Inc. / MBIA Corp. detailing MBIA Corp.’s current financial situation after the sale of MBIA UK and the company’s liquidity forecast Diligence Process Overview Source: Management Discussion

Houlihan Lokey and Counsel were unable to conduct a full due diligence process due to the lack of complete and current available information, and lack of access to Patriarch Partners and management teams of each of the portfolio companies of Zohar I and II MBIA and its counsel and other advisors are subject to court orders and confidentiality agreements limiting the extent of information that can be provided as part of the diligence exercise The Zohar I and II Collateral Manager is similarly bound by confidentiality orders and restrictions The documents provided concerning, and as evidence of, the Zohar I and II collateral were outdated and incomplete, such that it was not possible to verify that the Zohar funds maintain many of the holdings that serve as a basis for this presentation The information provided did not include any documents evidencing third party verification of the authenticity of the debt- and equity-related documents The information provided did not contain any transfer agreements (or other evidence of transfers) and existing evidence of ownership is non-verifiable or often circumstantial in nature, such that it is not possible to conclusively trace the current chain of title of the collateral For example, it is possible that portions of the collateral may have been transferred out of the Zohar funds (although, in the materials reviewed, there was no evidence that such transfers occurred)(1) We have not seen, if they exist at all, any official registry or ledger listing the debt and equity interests held by Zohar I and II in the portfolio companies Risk Factors Source: Management Discussion Footnote 2 on Slide 9 indicates one possible exception to this revealed through trial testimony from Lynn Tilton

The SEC fraud allegations and various litigations surrounding Lynn Tilton and Patriarch Partners, as former collateral manager, raise concerns about the reliability of the information provided, much of which was provided to MBIA by Tilton or one of the Patriarch entities Patriarch is believed to be the CEO or manager of nearly all of the portfolio companies, in which Zohar I and II hold or held debt or equity interests Patriarch was also the Collateral Manager of Zohar I and II until March 2016 In a recent decision, the Delaware Chancery Court held that Patriarch failed to turn over to the successor Collateral Manager a substantial amount of documentation regarding the Zohar I and II collateral Patriarch Partners Agency Services, a Patriarch entity controlled by Lynn Tilton, was and (despite having been replaced by the Zohar funds and despite continuing litigation) continues to act as the agent under the Zohar indentures Estimates of timing / magnitude of cash flows provided by MBIA Corp. may not be accurate due to the uncertainty surrounding specific issues tied to these cash flows Thus, due to the various due diligence constraints and the risks identified, Houlihan Lokey’s valuation analysis should be viewed as illustrative Risk Factors (cont.) Source: Management Discussion