Macquarie joins a growing number of banks pursuing Italian builder Cimolai for money they say they are owed from derivatives linked to the euro-$US exchange rate.
Macquarie Group says it’s facing losses of tens of millions of dollars after currency derivatives trades with Italian builder Cimolai went awry.
The companies began entering into foreign-exchange trades with each other in 2017, but the relationship foundered in September when Cimolai failed to make payments tied to the transactions, says a claim lodged by Macquarie on December 14 in London.Louise Kennerley“Cimolai has failed to pay to Macquarie the termination payment amount,” according to the bank’s claim. This failure “caused Macquarie a loss in the same sum.
A growing number of finance companies are pursuing Porcia-based Cimolai for millions of dollars they say they are owed from derivatives linked to the euro-$US exchange rate, which fell to its lowest level in about two decades in September.The family-owned construction company itself claims to have been battered by about €300 million of losses on the trades – some of which it alleges were sold without the knowledge of its board – and has sought protection from its creditors in Italy.
The products at the centre of the dispute are so-called targeted accrual redemption forwards, or TARFs, linked to the euro-$US exchange rate. These arethat have spawned multiple legal disputes between banks and family-owned corporations that bought them. Macquarie’s claim says that a 2018 document allegedly signed by Cimolai chairman Luigi Cimolai warns of the risks that come with TARFs. They offer “limited upside” with “unlimited downside,” and losses can be “magnified” when the trades use borrowed money, the claim says.An Italian court in Trieste granted Cimolai protective measures against the firms that sold it derivatives while it works on its restructuring.
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