UBS in Gathering Storm of Subprime Lawsuits

LOSSES & LAWSUITS

LONDON, NEW YORK AND CONNECTICUT - Swiss bank UBS has filed a lawsuit in London in retaliation for one in New York by HSH Nordbank over losses from soured subprime investments. Meanwhile, hedge fund Pursuit Partners is suing UBS over the mis-selling of $50 million of a subprime-laden collateralised debt obligation (CDO) soon afterward downgraded to junk.

German bank HSH previously launched a $275 million lawsuit for mis-selling more risky CDOs subsequently written down. A UBS spokesman says the bank had executed its contractual obligations and was comfortable with its legal position. The Swiss bank has suffered heavily from the subprime crisis - writing down $10 billion in losses and forced to seek $12 billion from Asian donors to keep afloat.

HSH has accused it of breaking its contract, fraudulent acts and using the HSH's funds for investment solely for UBS' benefit. Pursuit has similarly claimed UBS was guilty of "fraudulent concealment" of material information. Pursuit says UBS was in communication with Moody's about its CDO ratings but continued to market them between last July and October despite knowing rating changes were imminent.