UBS Look To Back Out Of $1.5 Billion Financing Agreement

by Stewart Douglas

Story link: UBS Look To Back Out Of $1.5 Billion Financing Agreement

Swiss investment bank UBS have petitioned to a court in the US to back out of their proposed funding of the $1.5 billion merger between Finish Line Inc and Genesco Inc, on the grounds of breach of a material contract trigger in relation to the solvency of the merged company.

The leading investment house has petitioned to a district court in New York to seek permission to back out of its proposed role in the deal as a result of concerns over the financial wellbeing of the resultant company following the proposed merger.

The case rests on fears that the merging companies are unable to sign a statutory declaration as to the solvency of the companies should they merge, which it alleges triggers a clause to void the contractual agreement.  If UBS were to back out of the deal without legal permission, they would be liable for damages under the terms of the contract.

The move has been seen as a major setback for the merging companies, given that UBS were supposed to finance the majority of the deal on a long term financing package, which would enable the merger to take place.  However, with UBS’s withdrawal it now looks as though the deal may stagnate without adequate cash resources to proceed.

The circumstances of the case have already been subject to legal challenge and debate, with Genesco filing a suit against Finish Line in order to enforce the deal to proceed, which will at the very least add to the hostility of any potential takeover move should it proceed.

UBS today declined to comment on the situation, pending the processing of its court application.  Genesco and Finish Line were today said to be disappointed that the deal had hit further rocky ground.