Earlier this week, a U.S. District Court Judge in Manhattan
Assured Guaranty Ltd.
) permission to partially move ahead with its lawsuit against
). Assured, in a lawsuit filed against UBS, accused it of
misrepresenting the quality of the loans that underlined $1.49
billion of mortgage-backed securities (MBS) that the latter had
In 2006-2007, Assured had provided financial guaranty insurance,
which warranted that if cash flows from the mortgages were
inadequate for paying investors their dues, then it would cover
those losses. However, a large number of these loans defaulted as
they did not match the standards that UBS had set.
Further, Assured received permission to sue UBS for providing
misleading information to the major rating agencies - Standard
& Poor's (S&P) and Moody's as it was a breach of agreement.
The company had placed a condition that MBS should be rated 'AAA'
or slightly lower for receiving guarantees. It alleged that UBS, in
an effort to get higher ratings for these risky MBS, offered
fraudulent data to the two rating agencies.
At the same time, the judge dismissed a part of the litigation
under which Assured demanded that UBS should repurchase $1.6
billion worth of these faulty mortgages. The judge stated that only
the trustee for the MBS can make such a demand.
Apart from this, Assured has similar litigations pending against
other banks -
JPMorgan Chase & Co.
Credit Suisse Group
Flagstar Bancorp Inc.
). In addition, the company reached a settlement deal with
Bank of America Corporation
) for $1.1 billion and
Deutsche Bank AG
) for $165.6 million for similar charges.
With Assured being granted sanction to proceed with the litigation,
the company will be able to recover some of the losses that it
incurred as a result of these risky MBS.
Currently, Assured retains a Zacks #3 Rank, which translates into a
short-term Hold rating.
ASSURED GUARNTY (AGO): Free Stock Analysis
BANK OF AMER CP (BAC): Free Stock Analysis
CREDIT SUISSE (CS): Free Stock Analysis Report
DEUTSCHE BK AG (DB): Free Stock Analysis Report
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UBS AG (UBS): Free Stock Analysis Report
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