Bloomberg News

OppenheimerFunds Sued by Royal Park Over Scaldis Loans

November 09, 2011

(Updates with comments from complaint starting in second paragraph.)

Nov. 9 (Bloomberg) -- Massachusetts Mutual Life Insurance Co.’s OppenheimerFunds unit was sued by Royal Park Investments SA/NV in New York over $1 billion in loans that Royal Park claims were improperly procured.

The lawsuit stems from “serial breaches” of lending agreements with Royal Park’s predecessor, Scaldis Capital Ltd., according to the complaint, which was filed today in New York State Supreme Court in Manhattan. Brussels-based Royal Park was set up in May 2009 by Fortis Bank SA/NV, Belgium and BNDP Paribas SA to manage a pool of distressed debt securities.

Scaldis in May 2007 committed to lend as much as $1 billion to AAArdvark XS, an Oppenheimer investment vehicle, according to the complaint. The suit accuses Oppenheimer, its Harbourview Asset Management affiliate and AAArdvark XS of “immediately” breaching the loan contracts, which allegedly limited the quality and type of securities that could be purchased with the proceeds.

“Although AAArdvark XS had no right to receive, much less keep, Scaldis’s money in light of defendants’ breaches, defendants insist that AAArdvark XS will keep that money unless and until a court orders AAArdvark XS to give it back,” Royal Park said in the complaint.

OppenheimerFunds has no comment on the lawsuit, said Samuel Wang, a spokesman for the company.

Fortis, Scaldis’s sponsor on the loans to AAArdvark XS, initially bore the risk until they were assumed by Royal Park, according to the suit, which is seeking unspecified compensatory damages, costs and disbursements, including attorneys’ fees.

The case is Royal Park Investments SA/NV v. OppenheimerFunds Inc., 653111/2011, New York State Supreme Court (Manhattan).

--Editors: Fred Strasser, Andrew Dunn

To contact the reporter on this story: Chris Dolmetsch in New York at cdolmetsch@bloomberg.net.

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net.


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