NAB faces $450 million lawsuit over toxic debt exposure

17 May 2010
Maurice Blackburn Lawyers is poised to launch another class action against a bank- this time against National Australia Bank Limited over its failure to disclose the bank's exposure to US toxic debt during 2008.

Maurice Blackburn Lawyers is poised to launch another class action against a bank- this time against National Australia Bank Limited over its failure to disclose the bank's exposure to US toxic debt during 2008.

Maurice Blackburn lawyer Brooke Dellavedova said 120 institutional and retail investors had now signed up for the class action which is to be lodged in the Federal Court in Melbourne in 4-6 weeks claiming losses in the vicinity of $450 million.*

Maurice Blackburn was contacted by shareholders following a $6 per share plunge in the bank's share price in July 2008. NAB had bought $1.2 billion in Collaterised Debt Obligations (CDOs) in 2006 which comprised asset backed securities, in particular US residential mortgage backed securities. These CDOs had a heavy exposure to the sub prime residential mortgage market which became "toxic debt" in 2007 and early 2008.

"We will allege that between 1 January 2008 and 25 July 2008 NAB did not properly disclose to shareholders and potential shareholders all material information relating to its CDO exposure. Shareholders who bought shares before NAB revealed its true position suffered losses as a result." said Ms Dellavedova.

"In early May 2008, the National Australia Bank told the market that it had provisioned $181 million, in respect of its $1.2 billion CDO exposure. The bank announced at the same time that this was a very conservative provision. Investors took comfort from this apparently conservative and appropriate approach.

However only two months later, in July 2008, NAB increased its total provision to $1.1 billion, or 90% of the value of the CDOs. In the following days NAB's share price plunged by nearly $6 and analysts complained strongly about the misleading nature of NAB's earlier announcement."

The class action is being funded by International Litigation Funding Partners, the same litigation funders that are funding the Multiplex class action. It is proceeding now because of the recent Federal Government announcement removing the uncertainties surrounding litigation funding of class actions.

*The $450 million losses are claimed by shareholders and are calculated on a price paid per share less price received on sale basis.

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