The Nomura swap contract with CSFB is thought to have been designed to insure the Japanese securities firm against losses should Railtrack fail to repay its indebtedness. Nomura held Railtrack bonds, which were subsequently converted into shares in the corporate. CSFB apparently told Nomura that the default swap did not cover convertible debt.
In order to get CSFB to pay out under the swap arrangement, Nomura claims it was forced to sells its convertible bonds and buy unsecured and non-convertible Railtrack bonds. This move cost it £1.2m, which it is now attempting to recover from the Swiss investment bank.
CSFB has not commented on the legal action.
Nomura Sues CSFB
Reuters reports that Nomura is taking legal action against Credit Suisse First Boston 'over a credit default swaps contract on Railtrack convertible bonds'.
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