CORRECTED - CORRECTED-Merrill wins court ruling in SCA debt case

miércoles 11 de junio de 2008 07:06 CEST

(Corrects to fix company name in headline to SCA, not SAC)

LOS ANGELES, June 10 (Reuters) - A U.S. District Court judge ruled on Tuesday that Security Capital Assurance Ltd's SCA.N XL Capital Assurance Inc unit will have to stand by $3.1 billion of guarantees on collateralized debt obligations, in dispute with Merrill Lynch & Co Inc MER.N.

Judge Jed Rakoff in a summary judgment ruled that Merrill Lynch International had not repudiated its obligations under seven credit default swaps it entered with XCLA, and that XLCA's attempt to terminate those swaps was invalid.

"MLI's motion is granted in all respects," Rakoff, of the Southern District of New York, wrote in a one-page ruling late on Tuesday, referring to Merrill Lynch International.

The judge, who said he would give reasons later, also dismissed three XLCA counterclaims as asked by Merrill.

Merrill spokesman Mark Herr said the firm is "pleased by the decision." A Security Capital Assurance spokeswoman had no immediate comment.

Security Capital Assurance had said it severed seven credit guarantee contracts with a Merrill unit because the investment bank had given key rights promised to SCA under the contracts to at least one other party.

SCA said its XL Capital Assurance unit was promised control rights on the $3.1 billion of portfolios it had guaranteed for Merrill Lynch International, but Merrill Lynch had given those same rights to one or more third parties.

By terminating the contract, SCA was hoping to get out from under an obligation that could cost it hundreds of millions of dollars.   Continuación...