Corporate & Securities Law

Texas Instruments Joins Other Institutional Investors In Suing Investment Banks Over Auction-Rate Securities Purchases

By James Eccleston

Texas Instruments has sued Citigroup, Morgan Stanley and Bank of New York Mellon Corp. for selling it $524 million in auction-rate securities which the company says it cannot liquidate.

The auction-rate securities market, once valued at $330 billion, collapsed in February 2008 when dealers stopped participating in the auctions.

The securities Texas Instruments holds are backed by student loans.  It had $575 million invested in them in February 2008, down from $1 billion in December 2007, according to a February 2008 regulatory filing.

Although Texas Instruments was aware that auctions could fail, the banks told it that previous auctions did so only because of the issuers' credit problems, and that the dealers would prevent failures because the student-loan credits had guarantees from the U.S. government, according to the complaint.

The banks also "omitted the extent to which the entire ARS market depended on continued bidding and purchasing by" the banks, according to Texas Instruments' complaint.

Lawyers at SNSFE continue to investigate and prosecute claims for auction-rate securities recoveries.  Feel free to contact attorneys at SNSFE.

Source: Bloomberg.com

Full post as published by FinancialCounsel on April 29, 2009 (boomark / email).