A Wachovia Corp. unit that sold insurance to protect against defaults on mortgage-backed securities is being liquidated in Bermuda and has asked a U.S. bankruptcy court to fend off its creditors.

BluePoint Re  is asking the U.S. Bankruptcy Court for the Southern District of New York to recognize the Bermuda proceeding so it can liquidate there. Approving the request would block creditors from seizing the unit's assets in the United States.

In court papers filed Wednesday, BluePoint said it tried to negotiate a restructuring with counterparties to its insurance contracts, but it failed to reached an agreement and moved to liquidate Aug. 7.

The Bermuda proceeding "offers the only practicable means to preserve the company's assets and achieve a global, equitable resolution of the company's liabilities," BluePoint said.

According to court documents, BluePoint provided insurance contracts, known as credit default swaps, to several major banking companies, including Deutsche Bank, Royal Bank of Scotland Group , and UBS. The unit also provided reinsurance to bond insurers.
Credit rating agencies downgraded BluePoint in June.

 It said further downgrades would have allowed counterparties to its swaps agreements to terminate the deals and accelerate payments.

In its Chapter 15 bankruptcy filing in the United States, BluePoint listed assets of more than $100 million and debts of more than $100 million. The case has been assigned to Judge Robert Gerber.

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