Judge: Hedge Fund Likely To Win In Lawsuit Against Commerz

Jan 26 2012 | 1:22am ET

Commerzbank is poised to lose its second battle over profit certificates with an alternative investments firm.

A Frankfurt appeals court indicated that Eurohypo, which Commerz bought in 2007, isn’t likely to win its appeal of a lower court ruling that found Commerz on the hook for profit certificates it stopped payment on in 2009. That’s good news for hedge fund QVT Financial, which sued the bank and is now likely to win on certificates originally issued by Hypothekenbank in Essen, but also on certificates originally issued by Rheinische Hypothekenbank.

Commerz stopped making payments on the certificates after two Eurohypo trusts linked to them took a look. But QVT argued that the loss didn’t matter—because Commerz had pleaded to compensate the unit for losses.

“Profit certificate owners in these circumstances need at least as much protection as shareholders,” Associate Judge Klaus Maier said in a preliminary assessment. “They may even need more because they have no influence on contracts changing corporate structure which shareholders get to vote on.” Since profit certificates were not dealt with in the 2007 profit-transfer and domination agreement, the court will have to impose one.

“The real fortune hunter here is Commerzbank,” QVT lawyer Josef Broich said. “By illegally withholding payments in the securities, the lender pushed their trading pricing down and at the same time took advantage of by buying them back cheap.”

Commerz lost a similar appeal last month in a case filed by private equity firm Crown Ocean Capital.


In Depth

Whisky Business: The Ultimate Liquid Alternative Investment

Sep 15 2014 | 7:02am ET

David Robertson knows his single-malt whisky—he was the Master Distiller at the...

Lifestyle

Hedgies Rock Out For Children's Charity

Sep 15 2014 | 8:40am ET

It's that time of year again—when hedgies trade in their spreadsheets for guitars...

Guest Contributor

Volkered: How Financial Sector Reforms are Creating Opportunities for Hedge Funds

Sep 16 2014 | 11:28am ET

New regulations have dramatically curtailed proprietary trading activity in investment...

 

Editor's Note

    Get A Sneak Peak Of The Alpha Pages

    Aug 25 2014 | 11:21am ET

    As many of you know, FINalternatives was recently acquired by the owners of Futures magazine, a firm called The Alpha Pages LLC. Today marks the soft-launch of a new sister site for both publications. As its name suggests, The Alpha Pages will cover all types of alternative investments, going far beyond the more well-known ones such as hedge funds and private equity. Read more…

 

Futures Magazine

September 2014 Cover

The London Whale: Rogue risk management

The London Whale saga is a twist on the typical rogue trader story as the rogue trader recognized the error of his ways and was prepared to take his medicine but was instructed by superiors to “defe...

The Alpha Pages

TAP July/August 2014 Cover

The Alpha Pages Interview: Senator Rand Paul

Senator Paul sat down in the debut series of the Alpha Pages Interview to discuss the broken tax code, regulation surrounding Bitcoin, and his plans for the 2016 Presidential election.