Ambac sues Citi, Credit Suisse over CDO dealBy: AFX | 07 Aug 2009 | 04:09 PM ET Text Size NEW YORK, Aug 7 (Reuters) - Ambac Financial Group Inc is suing Citigroup Inc and Credit Suisse Group , alleging the companies misrepresented the risks of mortgage-backed assets in a deal Ambac insured. The lawsuit, filed in New York State Supreme Court on Monday, seeks to void $2 billion in some of the credit default swap protection Ambac wrote on risky residential mortgages in a deal originated by Citigroup, or be awarded damages for losses. Ambac sold the protection to Citigroup through a collateralized debt obligation named Ridgeway Court Funding II in June 2007. Credit Suisse Alternative Capital, part of Credit Suisse Group, managed the selection of assets in the CDO. "We believe this suit is without merit and will defend ourselves vigorously," said Citigroup spokeswoman Danielle Romero-Apsilos. Credit Suisse did not immediately respond to a request for comment. In the complaint, Ambac accused Citigroup of using the CDO as a means of dumping risky assets the bank had failed to sell, knowing that the value of the securities was in steep decline. Credit Suisse, in turn, allowed Citigroup to dump toxic assets in the portfolio in order to generate management fees and win favor from the bank.
Credit Suisse managed about $6 billion in volume in Citigroup CDO deals, or about 50 percent of that business at Credit Suisse, Ambac said in the complaint. Credit Suisse "allowed Citigroup to hijack the portfolio for the purpose of dumping leftovers from Citigroup's prior CDO and residential mortgage backed securities offerings that it had been unable to sell," Ambac said. (Reporting by Karen Brettell; Editing by Padraic Cassidy) Keywords: AMBAC LAWSUIT/CITIGROUP (karen.brettell@thomsonreuters.com; +1 646 223 6274; Reuters Messaging: karen.brettell.reuters.com@reuters.net ) COPYRIGHT Copyright Thomson Reuters 2009. All rights reserved.
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