A unit of Wachovia Corp. that sold insurance to protect against defaults on mortgage-backed securities is being liquidated in Bermuda and has asked a U.S. bankruptcy court to stave off its creditors.
BluePoint Re Ltd. is asking the U.S. Bankruptcy Court in Manhattan to recognize the Bermuda proceeding so it can liquidate there. If approved, creditors will be blocked from seizing its assets in the U.S.
In court papers filed Wednesday, BluePoint said it tried to negotiate a restructuring with counterparties to its insurance contracts. But it failed to reached an agreement and moved to liquidate on Aug. 7.
BluePoint said the Bermuda proceeding "offers the only practicable means to preserve the company's assets and achieve a global, equitable resolution of the company's liabilities."
According to court documents, BluePoint provided insurance contracts, known as credit default swaps, to major banks, including Deutsche Bank AG, The Royal Bank of Scotland Group and UBS. BluePoint also provided reinsurance to bond insurers.
In June, credit rating agencies downgraded the company. Further downgrades, it said, would have allowed counterparties to its swaps agreements to terminate the deals and accelerate payments.
BluePoint is a subsidiary of BluePoint Holdings Ltd., which is owned by Wachovia. It listed assets of more than $100 million in its Chapter 15 bankruptcy filing in the U.S. and debts of more than $100 million. The case has been assigned to Judge Robert Gerber.