Bayerische Hypo obtains summary judgment of $39 million in Enron case

By Carlise Newman

Chicago, May 21 - Bayerische Hypo-und Vereinsbank AG obtained summary judgment of $39 million plus interest from the Italian Bank Banca Nazionale Del Lavoro, SpA in a dispute over which bank should bear the loss for funds advanced on Enron's behalf on the eve of its bankruptcy.

In dispute was a $39 million draw that Enron's contractor made on a letter of credit that HVB had issued and administered, and in which BNL had purchased a 100% risk participation interest. The draw occurred upon Enron's bankruptcy filing. When HVB demanded reimbursement from BNL, BNL refused, claiming that HVB should not have permitted the draw.

The United States Bankruptcy Court for the Southern District of New York said that HVB acted "consistent with the duty of care and its obligation to act in good faith," according to a news release.

"This is one of the largest Enron-related recoveries obtained through litigation thus far," said Brian Cogan, the partner at Stroock & Stroock & Lavan LLP, which represented Bayerische Hypo-und Vereinsbank AG, in the news release. "It properly allocates the burden of having dealt with Enron to whom the banks intended. BNL agreed to take the Enron risk on the letter of credit. That risk looked good when Enron was trading at $83 per share. As the court found, BNL cannot avoid the risk now that it has materialized."

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