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Press Release Royal Park Investments SA/NV starts a lawsuit against several investment banks in an action for damages arising

from Fortis Bank’s purchases of US residential mortgage-backed securities, securitized and/or sold by those investments banks
Brussels, December 21st, 2012 Royal Park Investments SA/NV (“RPI”) is the plaintiff in an action pending in New York state court against the following investment banks (the “defendants”): JP Morgan, Deutsche Bank, Goldman Sachs, Credit Suisse, Royal Bank of Scotland, Merrill Lynch, Morgan Stanley, Bank of America, Barclays, CitiGroup and UBS, alleging that the those defendants made negligent and fraudulent misrepresentations and omissions in offering documents used to sell hundreds of residential mortgage-backed securities (“US RMBS”). RPI is suing as the assignee of several Fortis Bank entities, the original purchasers of the RMBS. The special purpose and mission statement of RPI is to minimize the downside risk and maximize recoveries on its legacy portfolio. A complaint was filed and served on December 14th, 2012. RPI alleges that, in the offering documents, defendants misrepresented: (1) the underwriting guidelines used to originate the mortgage loans underlying the RMBS; (2) the loan-to-value (“LTV”) ratios of such loans; (3) the owner occupancy rates (“OOR”) of the loans; (4) that title to the loans was properly and timely transferred; and (5) the credit ratings assigned to the RMBS. RPI claims damages in excess of USD 3 billion. RPI’s lawsuit alleges that defendants negligently and fraudulently represented in the offering documents that the loans underlying the RMBS were originated pursuant to certain prudent underwriting guidelines designed to assess the borrowers’ ability and willingness to repay the loans, and the adequacy of the underlying properties as collateral for the loans. The action alleges these representations were false and misleading because defendants knew and concealed that the loan originators had abandoned their underwriting guidelines and instead were making loans to anyone they could, regardless of their repayment ability. Many loans were made to borrowers who either could not afford to repay them or never intended to repay them. The lawsuit also alleges that defendants knew and concealed that originators were using falsely inflated appraisals of the underlying properties and therefore they were not evaluating whether the values of the properties were sufficient security for the loans. The lawsuit further alleges that the LTV ratios stated in the offering documents were false and misleading because loan originators were using inflated appraisals, which caused the LTV ratios stated in the offering documents to be misleadingly understated. This created the false impression that the loans were safer and much less risky than represented. In addition, the lawsuit alleges that defendants falsely overstated the OOR in the offering documents. The lawsuit alleges that defendants knew that borrowers and originators were misrepresenting that the borrowers intended to occupy the properties when in fact the borrowers were not intending to and did not occupy the properties as their primary residences. This had the effect of making the loans appear safer and less risky than was true. Notwithstanding this knowledge, defendants reported the false and inflated OOR.


RPI’s lawsuit alleges that defendants did not properly or timely transfer title to the loans to the trusts issuing the RMBS, contrary to defendants’ representations in the offering documents. The lawsuit also alleges that defendants supplied the credit ratings agencies with false data about the loans, including the misrepresented information described above, which resulted in the credit agencies giving the RMBS “investment grade” credit ratings that they should not have received. The action alleges defendants were well aware of this but did not correct the misstatements. Finally, RPI’s lawsuit also alleges that several of the defendant banks, knowing that the US RMBS they sold were terrible investments, concealed that they were selling such securities “short” at the same time they sold them to RPI’s assignors, while simultaneously representing that such securities were safe ‘investment grade’ securities. After defendants made the misrepresentations above, and which induced RPI’s assignors to purchase the RMBS, the loans underlying the RMBS began to default at extremely high rates. As a result, the credit ratings agencies downgraded the RMBS from “investment grade” securities, to “junk” bond status or worse. Many of the RMBS are now in default and have suffered write-downs, causing billions of dollars in damages to RPI. RPI has instituted this lawsuit to recover those damages caused by defendants’ misrepresentations and omissions. About RPI RPI was created by Ageas (former Fortis Holding), the Belgian State acting through SFPI/FPIM and BNP Paribas for the purpose of acquiring a portion of the structured credits portfolio of ex-Fortis Bank. RPI was incorporated on 20 November 2008. The portfolio was acquired on 12 May 2009, for a purchase price of EUR 11,7 billion. The corresponding face value of the portfolio amounted to EUR 20,5 billion. Despite different challenges, RPI managed to post stable financial results, with a gross result of EUR 264 million during the first 3 quarters of 2012. During the first 3 quarters of 2012 RPI, which was set up as a defeasance structure, continued to work out the portfolio. At the end of September 2012 the company had EUR 12,6 billion assets under management. The Net Book Value (Economic Recovery Value) of these assets was EUR 8,1 billion, down from EUR 9,1 billion at the end of 2011. EUR 4,9 billion of debt remained outstanding, down from EUR 6,1 billion. The addition of profits to the retained earnings (in total EUR 857 million) has also strengthened the net worth of the company to EUR 2,6 billion. (end of Press Release) *** For additional information, please contact: Danny Frans: +32 2 221 03 41 or +32 494 56 72 36 Jacques Straetmans: +32 2 221 03 42 or +32 470 99 17 19