June 16, 2008 / 8:41 PM / 11 years ago

UPDATE 1-M&T Bank sues Deutsche Bank, others over CDO losses

(Adds detail on lawsuit)

NEW YORK/BANGALORE, June 16 (Reuters) - M&T Bank Corp (MTB.N), a large U.S. mid-Atlantic regional bank, has sued Deutsche Bank AG (DBKGn.DE) and others to recover more than $82 million it said it lost by investing in collateralized debt obligations.

M&T is seeking compensation for its alleged losses, a rescinding of its original purchase, more than $100 million of punitive damages, and other remedies, court papers show.

In a complaint filed on Monday with the New York State Supreme Court in Erie County, M&T accused the defendants of fraudulently representing that the “Gemstone” securities it bought in February 2007 were “safe, secure and nearly risk-free,” when in fact that was not the case.

M&T accused the German bank and HBK Investments LP, which it said marketed the Gemstone notes, of having “dramatically reduced the underwriting standards and due diligence performed in selecting and assembling the collateral underlying the notes they marketed.”

Deutsche Bank and HBK were not immediately available for comment.

M&T also accused the defendants of withholding information from rating agencies Moody’s Investors Service and Standard & Poor’s about problems they were experiencing at the time with subprime mortgage-related collateral.

M&T said this led the credit rating agencies to assign high ratings to the CDOs. The bank said it would not have bought the CDOs had they received lower ratings.

Illiquidity in credit markets has resulted in well over $400 billion of write-downs and credit losses throughout the financial services industry since the middle of last year. Much of those losses came from CDOs and other complex debt.

M&T counts Warren Buffett’s Berkshire Hathaway Inc (BRKa.N) (BRKb.N) among its largest shareholders. (Reporting by Dan Wilchins in New York and Jonathan Stempel in Bangalore; Editing by Braden Reddall)

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