Credit Suisse can’t dodge auction-rate payout: court

SAN FRANCISCO (Reuters) – Credit Suisse must pay hundreds of millions of dollars to a semiconductor manufacturer over failed auction-rate securities, though a U.S. appeals court on Thursday reduced an arbitrator’s award against the bank by roughly $75 million.

STMicroelectronics accepted a Credit Suisse offer in 2006 to invest in government-backed auction rate securities. But Credit Suisse soon began buying non-guaranteed securities, which plummeted in value when the auction-rate securities market seized up in 2007, according to court documents.

An arbitrator awarded STMicroelectronics more than $400 million in connection with the transaction.

On Tuesday, the 2nd U.S. Circuit Court of Appeals largely sided with STMicroelectronics.

“We have given Credit Suisse’s attacks on the arbitral award careful attention and find them without merit,” the court said.

However, the court also said Credit Suisse should be credited for approximately $75 million that STMicroelectronics received when it sold some of the debt at issue in the case.

Representatives for both companies did not immediately respond to requests for comment.

The case in the 2nd Circuit is STMicroelectronics N.V. v. Credit Suisse Securities (USA) LLC, 10-3847.

For STIMicroelectronics: Andrew Weissmann, Danielle Tarantolo, Elisabeth Genn, Barry Levenstam and Elizabeth Edmonson

For Credit Suisse: Andrew Frey, Mark Hanchet, Christopher Proenzano and Christopher Houpt.