The Securities Arbitration Law Firm of KlaymanToskes announced today that it is investigating the sales of Lyon Capital Management VII (“Lyon Capital”) Collateralized Loan Obligation (“CLO”) by Banc of America Securities (“Banc of America”) to its high net worth and institutional customers. Lyon Capital was issued in July 2007 at a time when investments created by pooling loans together had already begun to lose value. The value of Lyon Capital quickly unraveled and was eventually liquidated. KlaymanToskes believes that this poor performance shows that Banc of America knew or should have known the deal was bad given the then-existing market conditions. This also raises questions concerning the valuation procedures used to price the loans in the product.
Just last week, a Financial Industry Regulatory Authority (“FINRA”) Arbitration Panel Awarded a Lyon Capital CLO investor $1.38 million which represents the entirety of the investment lost by the Claimant, attorney’s fees, interest and hearing session fees. According to the Claimant in that case, Lyon Capital CLO was sold as low risk investment. However, the Claimant alleged, unbeknownst to him, while Banc of America was packaging the Lyon Capital deal, the loans which had been purchased in previous months were already losing value. Consequently, the Claimant purchased what he contended to be artificially inflated assets that were intrinsically worthless on the day the deal closed.
Interestingly, just one month after closing the Lyon Capital deal, Banc of America changed its disclosures about the potential for losses contained in similar loan pools. The prospectus issued in an August 2007 deal stated that because the market values of loans was declining, it was likely that the value of the portfolio “on the closing date will be substantially less than the principal amount” of the loans in the pool.
Accordingly, KlaymanToskes is investigating how Banc of America marketed and sold Lyon Capital CLO, and whether it properly disclosed the risks of this CLO to investors. Moreover, KlaymanToskes is looking into whether Banc of America over-stated and inflated the value of Lyon Capital CLO.
Investors who purchased Lyon Capital CLO from Banc of America can contact KlaymanToskes to explore their legal rights and options. The attorneys at KlaymanToskes are dedicated to pursuing claims on behalf of investors who have suffered significant investment losses. KlaymanToskes, an experienced, qualified and nationally recognized securities litigation law firm, practices exclusively in the field of securities arbitration and litigation. It continues its representation of investors throughout the world in securities arbitration and litigation matters against major Wall Street brokerage firms.
If you purchased Lyon Capital CLO from Banc of America, please contact Steven D. Toskes or Jahan K. Manasseh of KlaymanToskes, at 888-997-9956.