Santander Landlord Seeks Delay in RBS Interest-Rate Swaps Suit

  • Marme Inversiones owes about 700 million euros, banks say
  • Property owner says benchmark rigging means swaps are invalid

The owner of Banco Santander SA’s Madrid headquarters asked a London judge to delay a dispute with Royal Bank of Scotland Group Plc and other lenders who are seeking about 700 million euros ($798 million) from interest-rate swaps linked to the 1.9 billion-euro acquisition of the Ciudad Financiera complex.

Marme Inversiones’ lawyer Richard Hill asked the judge to stay the case amid insolvency proceedings taking place in Madrid. The firm, owned by property investors Glenn Maud and Derek Quinlan, argues it shouldn’t have to make payments under swap contracts because the deals were linked to Euribor, a benchmark rate that it says RBS was trying to manipulate.

Marme borrowed 1.6 billion euros from a group of banks to buy Santander’s 250-hectare office complex in September 2008, the week before Lehman Brothers Holdings Inc. filed for bankruptcy protection. Marme went into voluntary administration in 2014 after missing loan repayment deadlines and is subject to insolvency applications in Spain, Hill said.

The revelation that banks tried to rig benchmark interest rates underpinning trillions of dollars in contracts has led to lawsuits by clients who say they were misled, as well as criminal prosecutions and regulatory fines. Fired traders, bank shareholders and care home owners have all sued lenders in the U.K. saying they suffered from the misconduct.

Marme’s case is the largest of a number of London lawsuits seeking to rescind unprofitable swap contracts because they were linked to Libor.

Stephen Hayes, a lawyer for Marme, didn’t immediately respond to an e-mail seeking comment. RBS spokesman James Abbott declined to comment. Santander isn’t involved in the lawsuit.

The other lenders to Marme included HSH Nordbank AG, Bayerische Landesbank and ING Bank NV. Marme bought the swaps to hedge the risk of rising interest rates from all of them. When rates fell following the global financial crisis, companies that held swaps were hit with escalating payments.

The agreements have been terminated leaving a debt of around 700 million euros, RBS lawyer Adrian Beltrami told the judge on Monday. There is also a dispute about whether the case should be heard in London or Madrid.

Marme wants to rescind the swap agreements based on “false representations” by RBS, it said in court documents.

The case is Marme Inversiones 2007 S.L. v. The Royal Bank of Scotland Plc and others, High Court of Justice, Queen’s Bench Division Commercial Court, CL-2014-000348

Before it's here, it's on the Bloomberg Terminal.