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Citi Sues Morgan Stanley Unit For $245M Over CDS Pact |
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Monday, 28 September 2009 17:06 |
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Citigroup Inc. (C) sued a Morgan Stanley Inc. (MS) Friday for allegedly breaching a credit-default swap agreement, saying it is owed more than $245 million.
The lawsuit, filed in U.S. District Court in Manhattan, alleges Morgan Stanley & Co. International PLC failed to live up to its obligations regarding a 2006 credit-default swap agreement.
The CDS agreement was designed to hedge against losses that Citigroup's Citibank unit might suffer related to a $366 million revolving credit facility that Citibank entered into with a collaterized debt obligation known as Capmark VI, according to the lawsuit.
Citibank paid Morgan Stanley $750,000 in quarterly payments for the risk protection provided by the CDS agreement, according to the complaint.
The CDO was scheduled to mature in 2038, but its performance "declined substantially" after July 2006 as a result of the global financial crisis, according to the lawsuit.
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