The suit alleges, amongst other things, that Credit Suisse failed to disclose conflicts of interest and other material information, and provided misleading information, when structuring, marketing and selling an investment, known as Farmington, to ADCB in 2007, and that Standard & Poor’s provided inaccurate, investment-grade ratings to assets associated with the Farmington structure.
In 2005 and 2006, ADCB invested in a SIV known as Stanfield Victoria. During 2007, the SIV faced liquidity issues, and ADCB alleges that it was induced to enter into an emergency restructuring transaction, Farmington, based on false and misleading information.
ADCB said that the transaction was sold to it on the basis that it would help to preserve and protect the bank’s original investment in Stanfield Victoria. Farmington, the restructured vehicle, appeared to have positive valuations and prospects and purportedly benefited from a high quality portfolio of assets rated by Standard & Poor’s.
In addition, as a quid pro quo for the restructuring, ADCB was required to enter into an unfunded ‘credit default swap’ (CDS) to protect Credit Suisse’s loan exposure to Farmington, which Credit Suisse and the other defendants led ADCB to believe was relatively safe and carried minimal risk.
ADCB member of the board and CEO Ala’a Eraiqat said that this latest action is brought with the aim of protecting the bank from potential losses. Whilst the bank don’t anticipate a material impact on its earnings as a result of the disputed exposure.
"The exposure which is the main subject of this suit is a legacy exposure and is unfunded exposure; which means that the bank has not paid out any cash on this investment to date. On close examination, the investment was sold to the bank in an unacceptable manner," Eraiqat said.
