HSH Nordbank Settles 2008 CDO Suit in N.Y. Against UBS

HSH Nordbank AG, the German regional lender, settled a lawsuit it filed against UBS AG (UBSN) over losses on a collateralized debt obligation linked to the U.S. subprime-mortgage market.

HSH Nordbank, based in Hamburg, sued UBS in February 2008 over losses on a CDO called North Street 2002-4. HSH Nordbank said in the suit that its predecessor, Landesbank Schleswig-Holstein, lost almost all of the $500 million it invested in the CDO in March 2002.

The two sides have reached a settlement, the terms of which are confidential, Isaac Nesser, an attorney with Quinn Emanuel Urquhart & Sullivan LLP representing Nordbank, and Daniel J. Kramer, a lawyer with Paul Weiss Rifkind Wharton & Garrison LLP representing Zurich-based UBS, said in telephone interviews.

HSH Nordbank is one of a group of regional German lenders that have sued in New York courts over mortgage-backed securities. It sued Bank of America Corp. in New York State Supreme Court in December over $218 million in such investments, and has filed suits against Barclays Plc (BARC), Goldman Sachs Group Inc. and Morgan Stanley (MS) in the same court.

CDOs package assets such as mortgage bonds and buyout loans and use the income from that debt to pay investors in the new securities. The collapse of the U.S. market for subprime loans revealed the risk of such investments.

The case is HSH Nordbank AG v. UBS AG, 600562/2008, New York State Supreme Court, New York County (Manhattan).

To contact the reporter on this story: Chris Dolmetsch in New York State Supreme Court at 8969 or cdolmetsch@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net

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