Councils win $20m from rating agency
A HOST of regional councils have won back millions of dollars in losses after a victory against global rating agency Standard and Poor’s.
The world-first ruling, which affects 13 New South Wales councils, was in relation to the sale of complex financial instruments widely criticised for their role in the financial crisis.
On Friday, the Federal Court of Australia awarded the councils more than $20.2 million in compensation and legal costs after it found S&P, ABN Amro Bank and Local Government Financial Services misled the towns about products nicknamed Rembrandt notes in the lead-up to the global financial crisis.
The councils had collectively invested $16 million in the products, but when the investments collapsed during the crisis they lost more than 90 cents in the dollar.
But Justice Jayne Jagot found S&P’s AAA rating of the financial products was misleading and “grotesquely complicated”.
The financial product in question was created by ABN Amro.
S&P was also found to have made negligent misrepresentations to the body advising the councils, Local Government Financial Services.
Justice Jagot’s original ruling was handed down in November, but the individual payments to the councils were made known on Friday.
The list of councils and the payments they will receive include Bathurst ($932,956), Cooma ($1,866,451), Corowa ($933,225), Deniliquin ($466,612), Eurobodalla ($466,612), Moree ($1,866,451), Murray ($933,225), Narrandera ($1,866,451), Narromine ($466,612), Oberon ($933,225), Orange ($1,399,838) and Parkes ($2,799,677) and Sydney’s City of Ryde ($933,225).
The figures do not include the interest they will also receive.
The ruling has paved the way for other investors to act against S&P for claims of misleading ratings.