Citigroup (C) faces legal action from Ver Capital over $ 262m loan deal

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Citigroup, Inc. C London-based investment management company Ver Capital Partners sued for the liquidation of part of its bond portfolio to recover default on loans of € 224 million (US $ 262 million), alleging that the lender liquidated assets on its trading floor at uncompetitive prices following the crisis with the coronavirus have reduced their cost.

By carrying out illegal “self-selling” at underpriced prices, Citigroup created a conflict of interest in the bank by neglecting the chances of getting better deals from other prospective buyers and leaving the fund without a livelihood.

Citigroup has not yet filed an objection to the claim.

Ver Fund was among the investors who have accumulated riskier debt issued by European firms and has been highlighted by high returns in an era of falling low interest rates. Citigroup agreed to fund Ver’s rates on these loans and has also tripled its line of credit by the end of February 2020, according to the lawsuit.

Although leveraged loans have grown steadily in value over the past decade, they stalled in March 2020, the worst month for European high-yield lending assets since the financial crisis.

Faced with turmoil, Ver was forced to sell assets totaling € 78.5 million, the lawsuit said. However, on March 24, 2020, Citigroup managing director Cristina Pavillianiti sent Vera an email informing him that the lender was planning to extort money against the remaining collateral tied to the loan.

On the same day, Citi synthesized the sale of Vera’s assets. Trading data showed that higher rates were available for 36 of the 37 assets to be sold, according to the statement. Citigroup rates were the lowest in most cases. However, the bank continued to sell assets until an unidentified investor, Ver, placed additional funds to cover the remainder of the line of credit under the fund.

Our opinion

Despite the adoption of measures to combat rising costs, the company’s involvement in litigation may lead to an increase in legal costs. However, he is committed to pursuing growth strategies and continues to move confidently towards his financial goals.

The company’s shares are up 9.4% in the past six months, compared with a 13.9% rise recorded on the stock exchange. industry

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Citigroup currently has Rank 3 Zacks (retention). You can see See the full list of today’s Zacks # 1 Rank (Strong Buy) stocks here

Some banks continue to face legal investigations and have been charged with huge sums of money for malpractice. It may, Bank of America BAC agreed to pay a $ 75 million fine to settle the excessive fees case.

Last December Mr Cooper Group Inc. COOP a $ 28.6 million fine was imposed to settle litigation with the Consumer Financial Protection Bureau regarding certain inappropriate loan servicing practices committed between 2010 and 2015.

In November 2020 JPMorgan JPM was fined a $ 250 million fine for inappropriate risk management and internal control over a fiduciary business.

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The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Nasdaq, Inc.

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