Abu Dhabi Commercial Bank (ADCB) which is leading a class action in a New York court against four US financial institutions alleging fraud, yesterday said it is talking to other Gulf banks and investors to join the lawsuit.
ADCB said in a statement that it expects additional investors to "join or support" the legal action against against Morgan Stanley, the Bank of New York Mellon and ratings agencies Moody's Investors Service and Standard and Poor's aimed at recovering losses from investments through the Cheyne structured investment vehicle, or SIV.
"ADCB's participation in this legal action is a positive step aimed at recovering losses suffered by it and other GCC investors from US asset-backed securities investments," ADCB said in a statement.
"ADCB will act as the named plaintiff in the class action, which has arisen as a result of investment in the Cheyne SIV."
It said the Cheyne SIV was one of the largest investment vehicles set up to invest in US asset-backed securities, including residential mortgages. The Cheyne SIV entered receivership in September 2007. ADCB has already fully disclosed any losses it suffered from these investments, the statement said.
"This is the next step in a process aimed at recouping the losses ADCB has already incurred. 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," ADCB Chief Executive Eirvin Knox said in the statement. It added: "This class legal action will be one amongst many dozens of legal actions already filed in the US by global investors against large, global financial services firms related to investments in asset backed securities." The legal action states, amongst other things, that ADCB was misled about the quality of the underlying mortgages in which the Cheyne SIV would invest.
ADCB is owned 64.8 per cent by the Abu Dhabi Government through Abu Dhabi Investment Council. Its shares are traded on the Abu Dhabi Securities Exchange along with more than 60 other companies.
Last summer, the Cheyne Finance SIV – now known as SIV Portfolio – was reported to have faced massive losses as the commercial paper market failed. As a result, it became unable to raise money, and the vehicle sold its bank debt and asset-backed securities at a loss. The SIV, a fund that borrows money by issuing short-term securities that it then lends by purchasing long-term securities, was previously run by London-based hedge fund Cheyne Capital Management.