Bank of America has a lot on the line in its trial over the hyper-controversial $8.5 billion settlement it struck with a group of bondholders to settle claims covering up to $424 billion worth of bonds. If a separate group of bondholders, led by AIG, succeed in breaking up the deal, the costs of settlement will skyrocket. Some think the total tab could hit $30 billion.
The proceedings have been quite interesting so far, as lawyers for the group of bond holders that struck the $8.5 billion deal, led by Pimco and BlackRock, aim to show that they got the best deal they could. During the negotiations, when lawyers tried to extract more from Bank of America, a lawyer threw documents back across the table at them. At another point, according to the Financial Times, a Bank of America-hired lawyer said that "our grandchildren will have grandchildren" before the bondholders saw a dime in settlement.
Perhaps the most interesting revelation was that Bank of America was threatening to put Countrywide into bankruptcy court if they could not get the deal they wanted, a situation that would be far worse deal for bondholders. Indeed, the bank said they had gone to the OCC to obtain the necessary permissions. There were lots of rumors about this at the time.
As of now, it's too early to say which side has the upper hand.
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Source: http://www.fiercefinance.com/story/bank-america-prepared-put-countrywide-bankruptcy-court/2013-06-07
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