JP Morgan Chase & Co. may face legal challenges from some of the world's top banks over deals arranged for Enron Corp before it collapsed involving a US$500 million letter of credit (L/C) according to a 21 February report in the Wall Street Journal.

The challenges appear to be related to the same L/C that is at the centre of lawsuits that J P Morgan itself has filed against several companies (DC World News, 7 January 2003).

Enron tapped credit

The dispute reported by the Wall Street Journal centres on deals in the syndicated loan market that involved the US$500-million L/C. The newspaper, quoting sources apparently familiar with the matter, said Enron tapped part of the credit before it filed for bankruptcy court protection, and the banks in the "syndication pool" suspect that Enron used some of that money to reduce its debt to J P Morgan.

Whether the banks have any documentation to support their contention is not clear according to the newspaper. It claims that Credit Lyonnais is taking a lead role in the matter and last year invited syndicate members to a previously undisclosed meeting in New York to gauge interest in confronting J P Morgan.

No comment

Attendees at the meeting are reported to have included officials from law firms and banks including Germany's West LB AG and Deutsche Bank AG; HSBC Bank USA, part of HSBC Holdings Plc of London and France's BNP Paribas, according to New York Journal sources.

The newspaper said representatives of the banks, including Credit Lyonnais, declined to comment. A J P Morgan spokesman who apparently spoke with the New York Journal said "we believe it is inappropriate to comment on a hypothetical lawsuit."

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