Barlcays and Angelo Gordon In Dispute Over Commercial-Mortgage Bonds
December 16 2011 - 12:58PM
Dow Jones News
Barclays PLC (BCS, BARC.LN) and big-name hedge fund Angelo
Gordon & Co. are battling over whether some $600 million in
outstanding commercial-mortgage backed securities have
defaulted.
The fight, which also involves an argument from MBIA Inc. (MBI),
pits the two big names against each other to such an extent that
the trustee for the bonds, U.S. Bancorp (USB), has sought a judge's
help.
In essence, Barclays as an investor in the notes claims the
bonds have defaulted because there should have been some $8.5
million paid to investors. Barclays argues the misallocation of
those funds caused a material default and that the investors are
now owed the entire remaining principal and all interest.
Angelo Gordon, a hedge fund with $22 billion in assets under
management and a growing force in the real-estate investing world,
is the collateral manager for the bonds. It disputes there were any
errors and also disputes that specific error would cause a default,
refusing to hand over the collateral or let the deal be
liquidated.
Meanwhile, MBIA, another investor in the bonds, also disputes
there would be a default if Barclays was correct on the
mistake.
U.S. Bancorp said it could not determine in its capacity as
trustee whether there had been a mistake. In the court filing in
federal court in Manhattan it says it hired an independent expert,
at the request of Barclays, and that expert did determine a default
was made and it was prepared to liquidate the funds before MBIA
refuted the claims. It has placed nearly $2.3 million in interest
payments in an escrow account until the matter is settled.
Barclays couldn't immediately comment and Angelo Gordon couldn't
immediately be reached for comment.
-By David Benoit, Dow Jones Newswires; 212-416-2458;
david.benoit@dowjones.com
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