JP Morgan Chase said yesterday that a London court ordered WestLB to pay $165 million (€137 million) plus interest and costs to the US bank in a suit related to the collapse of Enron.

WestLB had not honoured a $165 million letter of credit purchased to guarantee a prepaid gas contract between JP Morgan and Enron against default, JP Morgan said.

The deal was done through a company called Mahonia.

In late 2001, after Enron collapsed into bankruptcy, Mahonia sued WestLB to collect on the $165 million letter of credit.

But WestLB had said it would not pay up on the letter of credit, calling the deal a "fraudulent scheme" involving Enron and the investment bank.

Justice Jeremy Cooke of the High Court of Justice in London - where Mahonia is based - issued a decision in favour of JP Morgan Chase and Mahonia, rejecting all of WestLB's allegations.

The court's decision requires WestLB to pay $165 million, plus interest and costs.

"We are disappointed with the outcome, we feel we were fully justified in resisting the demands for repayment, and we are not excluding the possibility of appeal," said Mr John Godfrey, a spokesman for WestLB.

WestLB was at the head of syndicate of 14 banks that included Lloyds TSB and Anglo Irish Bank.

Mahonia and other special purpose companies had allowed Enron to receive money up front through a series of prepaid contracts signed from the mid-1990s until energy company Enron collapsed into bankruptcy in December 2001.

The deals had drawn US regulatory scrutiny because they appeared to be disguised loans.

But the judge in the London trial said these were legitimate contracts that were properly accounted for by JP Morgan and Enron in accordance with generally accepted accounting principles. - (Reuters)