ADCB will take part in New York class action suit

Abu Dhabi: Abu Dhabi Commercial Bank (ADCB) is seeking compensation from the defendants who allegedly rated a structured investment vehicle (SIV), namely Cheyne SIV that collapsed last year, too high.

After provisioning Dh560 million against losses related to the US sub-prime mortgage crisis last year, ADCB yesterday said it will participate with other GCC investors in a class action suit in New York against US-based Morgan Stanley & Co. and Bank of New York Mellon.

"We have also started informal talks with other concerned financial institutions and sovereign wealth funds in the region two weeks ago for joining the case, and based on these conversations, ADCB expects additional investors to join or support the legal action as required," a senior ADCB official told Gulf News.

A class action is a civil suit brought by one or more people on behalf of themselves and others who are similarly situated. Typical class actions involve hundreds, thousands or millions of people who have comparable claims. Class action 'certification' permits all claims to be heard in a single trial.

Cheyne's SIV, which was premised on short-term borrowing to buy higher-yielding assets, collapsed last year. Investors have recovered about 55 per cent of the face value of their holdings in an auction of Cheyne's assets, according to Bloomberg.

The SIV held about $5.7 billion in senior debt, according to its receivers at the accounting firm of Deloitte & Touche.

"This is the next step in a process aimed at recouping the losses ADCB has already incurred, and additionally, this is an important step in paving the way for other GCC investors to ensure they are provided an opportunity to recover their own losses. This is the right thing to do and ADCB has taken a proactive early lead to protect itself and other investors," said Eirvin Knox, ADCB chief executive.

ADCB's officials refused to comment on any figures released in media reports, nor to reveal the targeted compensation.