Tuesday, February 26, 2008

HSH Nordbank Sues UBS in New York to Recoup Subprime Losses

UBS AG, Europe's largest bank by assets, was sued by the German state-owned bank HSH Nordbank AG seeking to recover losses on a $500 million portfolio linked to the U.S. subprime mortgage market.

HSH Nordbank, in a complaint filed yesterday in state court in New York, said it bought North Street 2002-4, a portfolio of collateralized debt obligations tied to the U.S. mortgage market, in 2002. Zurich-based UBS violated ``contractual obligations and fiduciary duties'' by changing the portfolio in ways ``solely for the benefit of UBS,'' the Hamburg-based bank said in a statement.

``UBS exploited the structure for its own ends, at HSH's expense, in violation of its contractual and fiduciary duties,'' the bank said in the complaint.

``UBS knowingly and deliberately created a compromised structure,'' HSH Nordbank said in the complaint. ``Indeed, within just one year, under the guise of shifting to real estate investments, UBS more than doubled the profit it extracted at the expense of HSH, to a staggering $275 million.''

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