Wachovia starts abandoning its previously prized assets:
Aug. 14 (Bloomberg) --
Wachovia Corp.'s BluePoint Re Ltd. unit, which insures structured finance and municipal transactions, filed for bankruptcy protection, citing defaults on securitized mortgages.
BluePoint filed a petition in Manhattan yesterday, saying it has more than $100 million in debt. The insurer also filed a petition to liquidate in Bermuda, where it is based, on Aug. 7. BluePoint asked the New York court to recognize the Bermuda proceeding and protect it from claims in the U.S., invoking provisions of Chapter 15 of the federal bankruptcy code.
Wachovia, the fourth-biggest U.S. bank, reported a $330 million
charge in the second half of 2007 related to BluePoint's losses on credit default swaps on collateralized debt obligations, or CDOs. BluePoint decided to liquidate after failing to negotiate a restructuring with banks including UBS AG that were counterparties to its swaps, according to court papers.
``Against a background of further deterioration in the credit markets, the plan could not be implemented before a further downgrade by the rating agencies,''
John C. McKenna, who was named provisional liquidator of BluePoint by a Bermuda court, said in a statement filed with the New York bankruptcy court.
BluePoint Re, the smallest reinsurer in the bond-insurance industry according to Moody's Investors Service, had its credit rating cut 14 levels to Ca from A2 by the agency yesterday. Moody's had lowered its rating two notches from Aa3 on July 11.
No Bailout
``Disruption in the financial guaranty markets and deterioration in the credit profile of BluePoint Re resulted in negligible new production volume for BluePoint Re'' this year, Moody's said in a statement yesterday.
Last month, Wachovia told BluePoint that it wouldn't provide the money it needed to fund a restructuring and continue in business, according to court papers. Royal Bank of Scotland Group PLC,
Deutsche Bank AG and Societe Generale were also counterparties to credit default swaps issued by BluePoint and part of the restructuring attempt, according to court filings.
BluePoint recorded no further losses this year and Wachovia has no obligation to provide money for the unit, the Charlotte, North Carolina-based bank said in an Aug. 11 regulatory filing.
Wachovia will make no additional investment in BluePoint, spokeswoman Christy Phillips Brown said today. ``This action is consistent with our focus on our core businesses and the prudent use of Wachovia's capital.''
Wachovia gained $1.31, or 8.9 percent, to $16.12 at 12:47 p.m. in New York Stock Exchange trading. The shares had declined 61 percent this year through yesterday.
The case is: In re Petition of John C. McKenna, as Provisional Liquidator of BluePoint Re Ltd., 08-13169, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
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