Lawsuit Challenges Termination of Insured Credit Default Swaps (PDF-121kb)
Lawsuit Challenges Termination of Insured Credit Default Swaps Authors: William C. F. Kurz, David M. Lindley, Ernest Patrikis, Rick B. Antonoff
In a lawsuit filed in New York federal court on March 19, 2008, Merrill Lynch International (“MLI”), an affiliate of the investment banking firm Merrill Lynch & Co. Inc., alleges that bond insurer XL Capital Assurance Inc. (“XL”) wrongfully terminated a series of insured credit default swap agreements based on XL’s claim that MLI repudiated the agreements by assigning voting rights with respect to the insured reference securities to a third party. MLI commenced the lawsuit to obtain a declaratory judgment that the swap agreements remain binding and enforceable against XL and that MLI did not repudiate them. In effect, MLI seeks a ruling that XL’s purported terminations are invalid.
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