U.S. real estate fund Luminent Mortgage Capital, has sued HSBC Holding over the valuation of the fund’s bonds.
In the lawsuit, filed yesterday in U.S. District Court in New York, the firm alleged the British bank's U.S. mortgage trading operation took advantage of the credit crisis to profit at the expense of the fund, the Wall Street Journal reported.
According to San Francisco-based Luminent, HSBC bought the bonds at a deep discount to their fair value, in at least one case employing an auction that included only one other bidder.
The firm, who invest in residential mortgage securities, said HSBC's New York office placed an improperly low valuation on nine subprime-mortgage bonds, which the fund's subsidiary had put up as collateral for loans.
The total face value of the bonds in question was $24 million.
According to the complaint, Luminent's problems with HSBC stem from transactions made in late July and early August, in which its subsidiaries provided securities to the bank in return for loans.
Luminent said in the complaint it offered to buy back the nine bonds at their principal amount plus accrued interest, but was told the bonds had been sold.
An HSBC spokeswoman declined to comment.
October 19 2007
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Luminent Mortgage Capital
HSBC
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