- Bank of America's (BAC +0.3%) Article 77 hearing resumed this week at which a NY State Supreme Court judge will or won't approve the bank's $8.5B MBS settlement with investors like Goldman, BlackRock, and Pimco. To review: The objectors - led by AIG - contend the amount is far too small and the trustee assigned to guard bondholder interests - BNY Mellon (BK) - was horribly conflicted due to business ties with BofA.
- In what CLSA Mike Mayo describes as the most explosive action thus far, AIG's attorneys tried to establish Brian Lin of little-known RRMS Advisors (he was hired by BK to write a report on the reasonableness of the $8.5B deal) was no more than a rubber-stamp for the cheap settlement. The judge eventually had to step in and cut off questioning.
- Mayo maintains his sell rating on BAC, believing Street consensus of a 1-in-20 chance of the settlement being throw out is too small. Should the judge actually vacate the settlement, the bank faces another $16B-$22B in legal damages, he says.
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