Deutsche Bank AG and HBK Investments inflated the value of collateralized debt obligations they sold to M&T Bank, leading to more than $80 million of losses, M&T has claimed in a lawsuit.
M&T, in which AIB has a 24 per cent stake, said in a lawsuit filed last night in New York Supreme Court the value of CDOs bought for $82 million from Deutsche Bank in February 2007 has dropped to about $1 million this year.
HBK, the Dallas-based hedge fund, is the collateral manager for the CDOs, M&T said.
CDOs were at the epicenter of turmoil in the credit markets last year because they packaged low-rated bonds composed of subprime mortgages, creating securities that received AAA ratings.
The biggest financial firms have recorded more than $392 billion of writedowns and credit losses tied to the US housing slump since the start of 2007, according to Bloomberg data.
M&T's fourth-quarter net income fell 70 per cent to $65 million, or 77 cents a share, hurt by a charge on collateralized debt obligations. First-quarter profit rose 15 per cent to $202 million.
M&T shares have dropped 27 per cent in the past 12 months.
Deutsche Bank spokeswoman Renee Calabro and Jon Mosle, HBK's general counsel, didn't immediately respond to requests for comment.
Bloomberg
Bloomberg