UPDATE 2-UBS seeks court OK to walk away from Genesco deal

(Adds details of NY lawsuit in paragraphs 5-6)

PHILADELPHIA, Nov 16 (Reuters) - The battle between merger partners Genesco Inc (GCO.N) and Finish Line Inc (FINL.O) intensified on Friday after Swiss bank UBS AG sought court permission to walk away from financing the $1.5 billion deal.

UBS sued shoe retailer Finish Line and shoe and hat retailer Genesco in the U.S. District Court for the Southern District of New York, and sought permission from a Tennessee court to be relieved of its obligation to fund the transaction. Copies of the lawsuits were obtained by Reuters.

Finish Line agreed to buy shoe and hat retailer Genesco in June. Less than two months later, however, Finish Line said it would review its options on the deal after Genesco posted a surprise quarterly loss.

Under the terms of the agreement, UBS could walk away from financing the deal if Genesco's financial health deteriorated substantially, according to previous filings with the U.S. Securities and Exchange Commission.

UBS on Friday sought to void its requirement to fund the deal, contending that Finish Line could not attest to the financial solvency of the merged company.

"Due to Finish Line's earnings difficulties and Genesco's disastrous financial condition, the combined Finish Line-Genesco entity would be insolvent," UBS said in the lawsuit filed with the federal court in New York. UBS declined to comment beyond its statements in the court filing.

In a filing with the SEC, Finish Line confirmed it was a defendant in the case but did not elaborate.

Neither Finish Line nor Genesco returned phone calls.

The three companies also have been battling in Chancery Court in Nashville, Tennessee. In September, Genesco filed a lawsuit seeking to force Finish Line to complete the acquisition and to enforce UBS to fund the deal.

In a Nov. 15 filing with the Tennessee court, UBS said "in an effort to sell their company before everyone knew that its financial condition was collapsing, Genesco's senior officers intentionally misrepresented and failed to disclose material facts to Finish Line, UBS and Genesco shareholders."

UBS on Friday asked the Tennessee court to be relieved of its obligation to fund the transaction, and sought damages, attorneys fees and other relief, according to the court filing.

Genesco's Chairman and Chief Executive Hal Pennington on Friday denied claims that he provided false financial information to the bank financing the transaction. He also said he would enforce his company's $1.5 billion agreement to be acquired by Finish Line.

"Today, my management team and I have been accused of defrauding UBS. On behalf of our company, our management team and our employees, I categorically deny those claims," Pennington said in a statement.

In September, Finish Line posted a second-quarter loss as slumping sales at established stores and one-time charges crimped profits. Its second-quarter net loss was $1.8 million, or 4 cents per share, compared with a net profit of $9.9 million, or 21 cents per share, in the year-ago period.

Genesco in August posted a second-quarter net loss of $4.2 million, or 19 cents a share, compared with a net income of $5.9 million, or 24 cents a share, a year ago. The company said its results were hurt by a later-than-usual back-to-school season and sales tax holidays in Texas and Florida.

UBS on Friday claimed in the court filing that a combined Genesco-Finish Line entity would have insufficient cash flow to pay off its debt. (Reporting by Jessica Hall; editing by Carol Bishopric)