The Appellate Division of the New York State Supreme Court yesterday reversed a lower court ruling and granted MBIA’s motion to dismiss a suit brought against it by a group of banks that had sought to block the transformation of the Armonk NY financial insurance company.

The banks had alleged a restructuring–approved by New York state insurance department in 2009–transferred some $5 billion out of MBIA’s primary operating unit and into an entity now known as National Public Finance Guarantee Corp. That money transfer, said the banks, amounted to a “fraudulent conveyance” and left MBIA potentially unable to cover losses incurred by holders of MBIA financial guarantee insurance policies.

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