Following claims it was mis-sold hundreds of millions of pounds of risky sub-prime mortgage securities one of Germany’s biggest financial groups is to sue Swiss investment giant UBS.
This is a worrying move as there are fears that it will spark a number of similar legal claims around the world.
Prior to this Barclays began proceedings against US investment bank Bear Stearns after two the latter’s hedge funds collapsed, losing a combined total of £816m.
German lender HSH Nordbank, the biggest provider of shipping finance in the world with assets of £156bn, is to file a claim against UBS in the State of New York to recover up to £377m it says was lost in an investment vehicle called North Street 4. This vehicle contained parcels of debt management, 70% of which was corporate. However, the rest was exposed to the US sub-prime mortgage market.
Spokesman for HSH, Bernhard Blohm claimed UBS said the fund was to be conservatively managed but that actions taken were 'clearly contrary to our interests'. He commented: “Thee world's largest asset manager, UBS, appears to have condoned actions which benefited only itself, at the expense of its clients.”
UBS declined to comment. It has been hard hit by the sub-prime meltdown, writing down £9.2bn from its own exposure to these risky home loans.
Indeed it is expected to post further losses as it tries to clean up the mess of its disastrous bet on US sub-prime mortgages. The Swiss giant employs thousands in the City of London.
Matt Spick of Deutsche Bank said: “Further write-downs are likely in at least the first quarter, further impairing confidence and raising the risk of market share losses.”
Market analysts had already warned investors to completely avoid UBS’s shares, with further bad news expected. The law suit will hardly help matters.
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