Bloomberg News

BofA’s Merrill Wins $146.1 Million Judgment Over Derivatives

April 13, 2012

Bank of America Corp. (BAC:US)’s Merrill Lynch unit won a $146 million judgment in federal court as part of a lawsuit against UISA Finance and Usinas Itamarati SA.

U.S. District Judge Richard Sullivan assessed the damages in a breach-of-contract suit involving a derivatives transaction in 2008, according to a filing dated April 10 in Manhattan. Sullivan conducted a five-day trial without a jury last June.

“Defendants made a bet on an interest-rate swap that carried the potential to save the companies millions in interest payments,” Sullivan said in his opinion. “Defendants will be required to live up to the obligations they knowingly accepted.”

Merrill Lynch sued in 2009 seeking $146 million in damages. UISA borrowed $125 million from Merrill in 2007, according to court filings. After the loan UISA made an agreement with the bank for an interest-rate swap in order to reduce its interest payments. When the financial crisis deepened in late 2008, UISA was unable to provide acceptable collateral to Merrill and the swap was terminated, according to the April 10 filing. At that time UISA and Itamarati, the guarantor of the agreement, owed $146 million.

‘Disastrous Loser’

Sullivan said in his opinion that the financial crisis of 2008 made UISA’s bet “a disastrous loser.” He granted Merrill Lynch’s motion for judgment in 2010 on the issue of liability. The trial was over damages.

“We are pleased with the court’s decision,” Bill Halldin, a spokesman for Merrill Lynch, said in an e-mail. Richard Werder, a lawyer for UISA, didn’t immediately respond to messages seeking comment.

Usinas Itamarati is a Brazil-based manufacturer of sugar and ethanol. UISA and Usinas are owned by Companhia Itamarati de Investimentos.

The case is Merrill Lynch Capital Services v. UISA Finance, 09-02324, U.S. District Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Don Jeffrey in New York at djeffrey1@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net


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