RBS turns to UK courts to block Highland's CLO warehouse lawsuit

The tussle between RBS and Highland Capital over a failed CDO has resumed this week. RBS has taken the case to the High Court in London in a bid to block a $100 million lawsuit filed by Highland in Texas, according to various media reports.

The legal battle stems from a planned CDO which would have been managed by Highland and underwritten by RBS in 2008 as the credit markets crashed. As a result, the transaction failed to close and the bank moved to take control of the underlying loans. RBS is then alleged to have held a “sham auction” in order to pick up the assets at low prices, according to court filings. At an earlier hearing Highland was ordered to pay RBS £19 million ($29.6 million) as the proceeds from the loan auction did not cover the cost of financing that RBS provided the manager.

Highland Capital is also facing court action related to another CDO in 2008. UBS alleges that the manager fraudulently induced it to restructure a CDO.