Nov. 30 (Bloomberg) -- WestLB AG says it is owed $22.3 million by a Nomura Holdings Inc. unit after the Japanese bank decided debt securities it created became worthless at the height of the financial crisis.
The lender is appealing an earlier decision in favor of Nomura by a U.K. judge, who said Dusseldorf, Germany-based WestLB had failed to prove the valuation resulted in losses that wouldn’t have occurred anyway.
The securities, linked to an Asian investment fund, were due to mature in November 2008. Because of the banking crisis caused by the collapse of Lehman Brothers Holdings Inc., Nomura was unable to find bidders to establish the value of the notes and concluded they were worthless.
The judge in the original trial “should have considered that the market conditions were not directly relevant to the valuation exercise,” WestLB lawyer Jonathan Nash told the U.K. appeals court today. The securities held by WestLB should have been worth $22.3 million because the underlying assets had “significant value,” he said.
Nomura spokeswoman Beth Brophy didn’t immediately comment on the dispute.
Tokyo-based Nomura in 2003 sold WestLB structured notes linked to the Global Opportunities Fund, which was managed by First Capital Management Ltd. of Mauritius, and arranged by the firm’s managing director, Rafat Rizvi.
Nomura later determined there was no public information about many of the entities in which the fund invested, and that one of the entities was fake, according to court filings in the lawsuit. Indonesia issued an arrest warrant for Rizvi, Nomura said in the filings.
Rizvi “turned out to be unreliable, possibly fraudulent,” Nash said. He said the judge at the original trial should have tried to put a value on the securities instead of accepting they were worthless.
“The judge, even with all the difficulties, could have come up with a figure,” Nash said.
The trial court case was WestLB v Nomura Bank International Plc & Anr, 09-497, High Court of Justice, Queen’s Bench Division, Case No. 09-497.
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