UBS reaches settlement on litigation with Enron Creditors Recovery Corp.
UBS announced today that it has entered into an agreement with Enron Creditors Recovery Corp. (formerly Enron Corp.) to settle litigation that Enron commenced against UBS in 2003 related to equity derivative contract payments that Enron sought to recover from UBS. UBS is settling this litigation without any admission of liability.
UBS believes it had valid defenses to all of Enron's claims, but chose to settle this case to eliminate the uncertainty created by the proceeding. UBS is pleased to bring this matter to a close.
Under the terms of the settlement, UBS will pay Enron $115 million and will waive a proof of claim for approximately $5.5 million that UBS filed in Enron's bankruptcy case. The settlement is subject to the approval of the U.S. Bankruptcy Court for the Southern District of New York.
The United States Bankruptcy Code provides that, under certain circumstances, anyone who received a payment from a company that subsequently goes bankrupt may be required to return the payment if the company was insolvent or inadequately capitalized, or it made the payment with the intent to hinder, delay, or defraud its creditors. Enron's claims against UBS were premised on the contention that payments to UBS were recoverable on these bases, a contention that UBS disputed.
Enron commenced this case in November 2003 to recover payments totaling approximately $418.3 million that were made during 2001 pursuant to swap agreements indexed to Enron's common stock and forward contracts in which UBS had agreed to sell and Enron had agreed to buy Enron stock.
During fiscal year 2006, UBS provisioned funds toward the resolution of this case. This settlement will not materially impact future financial results.