by Calculated Risk on 2/18/2008 12:15:00 PM

From Bloomberg: Bond Insurer Split May Trigger Lawsuits, Analysts Say

``Despite the regulatory interest in separating the exposures, the essential fact remains that all policy holders, whether municipal or structured finance, entered into contracts backed by the entire entity,'' analysts led by Jeffrey Rosenberg in New York wrote in a note to investors dated Feb. 15. A breakup is ``likely to lead to significant legal challenges holding up the resolution of the monoline issues for years.''
...
``The fact that one group of policy holders' exposures has imperiled the policies of the other does not mean they should forfeit the value of their claims altogether,'' the Bank of America analysts said.

This split isn't being driven just by regulatory interest. It appears that the combined company is worth less than the sum of the parts. Splitting the company will allow the "good bank" to write more business, increasing the value. The goal is to share that increased value equitably among the stakeholders (a difficult task) and minimize the lawsuits.