Merrill Lynch sued XL Capital Assurance, a unit of Security Capital Assurance, in Federal Court for allegedly failing to honor "seven credit guarantee contracts".
One of the speculative reasons for the lawsuit is Merrill Lynch's apparently well-founded fear that it will now have no choice but to writedown (i.e., report as worthless) the debt allegedly guaranteed by these seven credit guarantee contracts.
These "credit guarantee contracts" appear to be the functional equivalent of Insurance Policies.
For its part, XL reportedly answers that its contracts with Merrill Lynch gave XL "control rights" on the portfolios it had guaranteed, but that Merrill Lynch gave those rights away to others regardless.
The amount of money invested in the portfolios in question is $3.1 Billion. See "Insurer Gives Its Reasons for Severing Merrill Pacts" p. C5, col. 6 "Business Day" Section (Reuters Report published in New York Times Nat'l Ed., Friday, March 21, 2008).
Please Read The Disclaimer.
Comments