HSH takes a long-term view

LB Kiel – now part of HSH Nordbank – wanted to prepare in advance for the removal of state guarantees by looking for a high-quality, managed portfolio to diversify its credit risk. It ended up instead with a poorly performing CDO and a high-profile lawsuit. Duncan Wood finds out what happened

When Martin Halblaub initiated a review of the structured credit investments at LB Kiel, shortly after joining the German bank in September 2001, he was not aware that he was setting in motion a chain of events that would see him sitting on the steps outside the New York office of Barclays Capital a year later, waiting vainly for information about one of the bank’s managed collateralised debt obligations (CDOs).

The performance of the Barclays CDO, in which LB Kiel invested $151 million during