Germany's HSH Nordbank said on Sunday it will start legal proceedings against Swiss bank UBS to recover significant losses on a $500 million CDO portfolio.
"UBS appears to have condoned actions which benefited only itself, at the expense of its clients," the regional state bank said in a news release.
"After repeated attempts to discuss our concerns with senior management at UBS, we find that, with regret, we have no alternative but to commence legal proceedings."
A spokesman for UBS declined to comment.
The news comes just ahead of UBS's emergency shareholder meeting on Wednesday, where it will ask for approval for a $11.94 billion capital injection to boost after last year's heavy subprime losses.
UBS in 2002 sold the CDO's (collateralised debt obligations), which were linked to the US mortgage market, to the Landesbank Schleswig-Holstein, which subsequently merged with Hamburgische Landesbank to become HSH Nordbank.
UBS -- which has written off $18.4 billion in subprime assets, making it Europe's worst victim of the credit crisis -- held the CDO's on a discretionary basis in the "North Street 2002-4" special purpose vehicle.
HSH Nordbank said it expected to file its claim in New York by the end of February.
CDO's package pools of debt and then issue bonds backed by them. Demand for CDO's boosted credit markets in recent years, but this has unraveled as investors have shunned these securities in the subprime crisis. (Reuters)
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