(Bloomberg) — Syncora Guarantee Inc., the bond insurer fighting Detroit's debt-cutting plans, said it may cancel insurance it wrote for interest-rate swaps that the city is seeking to terminate with an $85 million settlement.
Under a deal announced last month, Detroit would pay the swap counterparties, UBS AG and Bank of America Corp.'s Merrill Lynch unit, about $85 million of the $288 million it may owe them. Syncora asked the judge overseeing the city's bankruptcy to reject the settlement, in part because the accord lets the banks seek insurance to cover any losses.
“The swap counterparties' actions have materially prejudiced Syncora and, for various reasons, compromised the swap counterparties' ability to claim under the swap insurance in the future,” the New York-based company said in a March 17 filing in U.S. Bankruptcy Court in Detroit.
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