Citi, Goldman, Deutsche do not accept 'trick' claim

8 February 2008

Citigroup, Goldman Sachs and Deutsche Bank have all challenged a lawsuit from Solutia, which claims the Wall Street giants tricked it into accepting a provision it did not want as the four firms made a deal.

Last October Solutia, a chemicals company, signed a contract with the three lenders for $2 billion worth of financing to lift it out of the bankruptcy the St Louis firm had been mired in for four years.

But the three companies wrote a 'market MAC' into the contract, a provision which meant they could back out of the loan if financial markets became seriously rocky after the deal was made.

Now Solutia has hit the lenders with a $2.25 billion lawsuit, claiming that the trio gave it "the impression" that the terms were standard.

Citigroup, Goldman and Deutsche, however, say the company was not tricked into accepting the provision, but that the contract was negotiated fairly with all parties being aware of the terms.

Although the lenders accepted that implementing the provision was "relatively rare", they said that this was no longer the case following the global credit crunch.

In a landmark case filed in the US Bankruptcy Court, this is the first time a firm in liquidation has challenged a market MAC.

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