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: Quote, Profile, Research, Stock Buzz) and Finish Line Inc (FINL.O: Quote, Profile, Research, Stock Buzz) 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.