Ratings agency S&P is defending an action brought by 91 Australian councils, church groups and charities over investment losses suffered during the GFC.
The action, funded by Bentham IMF limited, relates to complex derivative products carrying AAA ratings from S&P that were sold by the Lehman Brothers to the litigants in the lead-up to the GFC.
According to a statement by Bentham IMF, S&P sought last year in the Federal Court to have the claim set aside on the grounds that the claim was an abuse of process, that it had no prospect of success and that, in any case, the US-based S&P should not be required to submit to the Australian Courts.
“Justice Stephen Rares rejected all three arguments, stating that the claimants had an arguable case and that S&P was indeed subject to Australian jurisdiction,” said Bentham IMF.
Bentham IMF executive director John Walker said S&P has tried to “delay and divert any attempt to bring it to account for losses suffered on products that it had no reasonable basis to provide its AAA ratings”.
“This application was one such delaying tactic but it has backfired badly. With the latest S&P roadblock removed, our clients now look forward to resuming their claim against S&P,” said Mr Walker.
A settlement reached with the liquidators of Lehman (Australia) last November will see 80 claimants recover about half of the $180 million in collective losses suffered on the derivative investments, said Bentham IMF.
The claim against S&P seeks to recover the balance of losses suffered after funds received from the settlement, said the statement.
Bentham IMF announced last December that it had agreed to fund claims against S&P in the
Netherlands on behalf of institutional investors across Europe, which suffered losses on complex investments rated AAA by the rating agency.
