Barings bondholders to sue

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The Independent Online

Financial Editor

Bondholders of Barings yesterday decided to sue the former top executives of the collapsed merchant bank and three prominent City houses in an effort to recover more than pounds 100m lost last year.

The directors to be named in the writs are Peter Baring, the former chairman, Andrew Tuckey, the former deputy chairman who is still working at Barings on a consultancy basis, and Peter Norris, the former head of investment banking. All three resigned last year shortly after Barings collapsed under nearly pounds 900m of losses run up by Nick Leeson in illicit derivatives speculation.

The City advisers are BZW Securities, Hoare Govett Securities of the ABN Amro group and Cazenove & Co, which participated in the January 1994 bond issue.

When ING, the Dutch bancassurer, bought Barings last year, it left out of the deal the Barings holding company that had issued the bonds, rendering them worthless. A large number of private investors, as well as several powerful institutions like Scottish Amicable and Legal & General, lost money.

"We are confident that proceedings will be issued as anticipated in early March," said Jonathan Stone, a lawyer leading the Barings Perpetual Noteholders Action Group. The writs will be aimed at recovering the original pounds 100m lost on the bonds, and a further pounds 9m in lost interest payments, as well as costs of litigation. The action group is represented by the solicitors SJ Berwin. BZW and Hoare Govett yesterday made no comment on the announcement of impending legal action.

Mr Stone said the legal action would be based on claims that the January 1994 bond prospectus put out by Barings plc and the managers, Hoare Govett, BZW, Cazenove and Baring Brothers & Co, was defective. "There are a number of issues in the document which give rise to considerable concern, and if it had not been defective, the bonds could not have been issued," Mr Stone said.

Ernst & Young, administrators to Barings Group, have issued writs against three firms of accountants alleging negligent auditing and claiming several millions of pounds. The firms involved are Coopers & Lybrand in London and Singapore and Deloitte Touche in Singapore. Ernst & Young have been collecting evidence since the collapse of the merchant bank in late February 1995.

Mr Baring, Mr Tuckey and Mr Norris have all been investigated, along with 20 other former executives fired by ING last year, by the City watchdog the Securities and Futures Authority. Some of the senior executives are expected to face disciplinary sanctions.

The bondholders said the decision to resort to legal action resulted from frustration at lack of progress in attempts to persuade ING to recognise the grievances of the investors.

According to Mr Stone, ING committed a serious error of judgement when it agreed shortly after purchasing Barings to honour the pounds 90m bonuses due staff for 1994, despite the fact that the merchant bank had been bankrupted. In view of this, ING should be willing to consider meeting the pounds 100m compensation claim, Mr Stone said.