RBC named as US schools weigh legal action over $200 million CDO investments

School officials in Wisconsin, United States, are considering taking legal action against banks with whom they made a total of €200 million structured credit investments, according to local paper reports. The Royal Bank of Canada Europe and Stifel, Nicolaus & Co. were among those named in the confidential report prepared for the districts, according to a joint press release sent to the Wrightstown Post Gazette.

The Kimberly school board, which seeks the return of $5 million, on Monday will vote on whether to jointly hire an attorney with four other school districts that made investments in CDOs, says the paper.

The other districts involved are Waukesha, Whitefish Bay, West Allis-West Milwaukee and Kenosha. Using one valuation, the combined investment might now be worth as little as $80 million, they said.

Kimberly's investment was made with $4.3 million in borrowed money and $700,000 from the district trust fund. The school board approved the spending as a means to bolster its fund for retired teacher benefits. Kimberly superintendent Bob Mayfield is quoted as saying a review of the investment conducted by attorneys this year suggested the districts were misled into believing their investment carried a low degree of risk. Kimberly purchased the product in 2006.