By Emily Chasan
NEW YORK, Jan 12 (Reuters) - A unit of struggling bond insurer Ambac Financial Group Inc sued Credit Suisse Securities and a mortgage affiliate for 'pervasive and material misrepresentations' on mortgage-backed securities that Ambac insured in 2007.
Ambac Assurance Corp said in the lawsuit filed on Tuesday that the Credit Suisse Group AG unit, along with its affiliate DLJ Mortgage Capital, had misled the insurer about a pool of more than 2,000 mortgage loans by hiding information that many of the borrowers in such pools had little or no ability to repay their loans.
In the lawsuit filed in New York State Supreme Court in Manhattan, Ambac said that it was induced to insure the loan portfolio for securitization based on 'untrue representations,' and that since the transaction closed in March 2007, the loans have 'defaulted at a remarkable rate.'
Ambac and other bond insurers have struggled to write new business since losing their top notch credit ratings in 2008 after large losses linked to repackaged debt and securitizations.
Ambac warned last year that it could run out of cash and be forced to file for bankruptcy protection. A settlement of a case such as this, could generate cash for the company or reduce its future liabilities.
Last month rival bond insurer MBIA Inc, filed a similar lawsuit, saying third-party investigators had found that 85 percent of a sample of loans that were bundled into the securities it insured on behalf of Credit Suisse and affiliates including DLJ, had breached their loan covenants.
Ambac said a third-party investigator found 80 percent of a sample of loans in its pool were in breach of warranties that were given to it by DLJ and Credit Suisse.
Ambac is seeking to recover tens of millions of dollars in the lawsuit, saying it has already paid out $44 million, and also claims it is entitled to punitive damages.
'We believe this lawsuit is without merit, and we intend to defend ourselves vigorously,' said Bruce Corwin, a spokesman for Credit Suisse.
Credit Suisse said last month that it believed the MBIA suit was also without merit.
(Reporting by Emily Chasan; Additional reporting by Dan Wilchins; Editing by Tim Dobbyn) Keywords: AMBAC/CREDITSUISSE (emily.chasan@thomsonreuters.com; +1 646 223 6114; Reuters Messaging: emily.chasan.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
NEW YORK, Jan 12 (Reuters) - A unit of struggling bond insurer Ambac Financial Group Inc sued Credit Suisse Securities and a mortgage affiliate for 'pervasive and material misrepresentations' on mortgage-backed securities that Ambac insured in 2007.
Ambac Assurance Corp said in the lawsuit filed on Tuesday that the Credit Suisse Group AG unit, along with its affiliate DLJ Mortgage Capital, had misled the insurer about a pool of more than 2,000 mortgage loans by hiding information that many of the borrowers in such pools had little or no ability to repay their loans.
In the lawsuit filed in New York State Supreme Court in Manhattan, Ambac said that it was induced to insure the loan portfolio for securitization based on 'untrue representations,' and that since the transaction closed in March 2007, the loans have 'defaulted at a remarkable rate.'
Ambac and other bond insurers have struggled to write new business since losing their top notch credit ratings in 2008 after large losses linked to repackaged debt and securitizations.
Ambac warned last year that it could run out of cash and be forced to file for bankruptcy protection. A settlement of a case such as this, could generate cash for the company or reduce its future liabilities.
Last month rival bond insurer MBIA Inc, filed a similar lawsuit, saying third-party investigators had found that 85 percent of a sample of loans that were bundled into the securities it insured on behalf of Credit Suisse and affiliates including DLJ, had breached their loan covenants.
Ambac said a third-party investigator found 80 percent of a sample of loans in its pool were in breach of warranties that were given to it by DLJ and Credit Suisse.
Ambac is seeking to recover tens of millions of dollars in the lawsuit, saying it has already paid out $44 million, and also claims it is entitled to punitive damages.
'We believe this lawsuit is without merit, and we intend to defend ourselves vigorously,' said Bruce Corwin, a spokesman for Credit Suisse.
Credit Suisse said last month that it believed the MBIA suit was also without merit.
(Reporting by Emily Chasan; Additional reporting by Dan Wilchins; Editing by Tim Dobbyn) Keywords: AMBAC/CREDITSUISSE (emily.chasan@thomsonreuters.com; +1 646 223 6114; Reuters Messaging: emily.chasan.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.