Citi sues Morgan Stanley over CDS, claims $245 mn

Last Updated: Saturday, September 26, 2009 - 12:03

New York: Citigroup Inc sued Morgan Stanley on Friday for breach of contract, saying the Wall Street firm owed it USD 245.4 million for protection it bought on a loan.

Citibank bought a credit default swap (CDS) from Morgan Stanley & Co International in 2006 on a USD 366 million revolving credit facility it provided to an issuer of collateralized debt obligations (CDO), according to the complaint filed in US District Court in Manhattan.

The swap obliged Morgan Stanley to pay Citibank the money as a result of a payment default on the credit facility to the CDO, known as Capmark VI, it said in the complaint.

Liquidating the CDO collateral did not cover the entire amount, and Citibank said it exercised its right under the CDS to have Morgan Stanley make up for the shortfall, but it refused, according to the complaint.

Citibank paid Morgan Stanley about USD 750,000 for the CDS, according to the complaint.

Morgan Stanley could not immediately be reached for comment.

The case is Citibank NA vs Morgan Sanley & Co Internation al PLC, US District Court, Southern District of New York, No. 09-8197

Bureau Report

First Published: Saturday, September 26, 2009 - 12:03

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