Unlock Editor’s Digest for free
Roula Khalaf, editor of the FT, picks her favorite stories in this weekly newsletter.
Citigroup is facing a €59 million lawsuit brought by a UK-based investment firm, which claims the Wall Street bank gave “misleading” and “inaccurate” advice when it worked for it on a possible public listing.
Alcimos, which was looking to raise capital to invest in the Greek property market, claimed it lost tens of millions of euros in fees after Citi bankers misled the company’s management about investor appetite for a 2018 IPO.
Citi has denied the allegations, which are contained in documents filed at the High Court in London and reviewed by the Financial Times.
The suit centers on Alcimos hiring Citi in late 2017 to organize and conduct early meetings with investors about a potential sale of a stake in the special purpose vehicle and to provide feedback to the company.
Alcimos claimed that Citi incorrectly told its management that certain investors were not interested in supporting the listing. The same investors are said to have told the company directly that they are potentially interested in participating in the IPO.
Citi, which argued that there was insufficient investor support to make the proposed IPO viable, denied that it had misrepresented the level of investor interest.
The lawsuit is an unwelcome distraction for Citi, which has been trying to move on from several high-profile failures in recent years. Last year, the bank was fined 135.6 million dollars in the US for failing to correct long-standing problems in risk control and data management, and was fined £62 million in the UK for failing to prevent a $1.4 billion fat-finger trading error.
In emails cited in court documents, Linos Lekkas, a senior Citi dealer who retired last year, apologized to Alcimos’ management for “any inconsistency in messaging that we may have inadvertently included in our presentation or conveyed during any of our calls” before terminating the relationship between the companies.
Alcimos then replaced Citi with Barclays in May 2018, but claimed that “the need to explain Citi’s inaccurate investment feedback and the replacement of Citi had a negative impact on investor sentiment for the proposed IPO”.
It eventually withdrew from the listing as deteriorating market conditions meant “there was no longer sufficient appetite for investment”. Alcimos, which had hoped to raise up to 250 million euros, said it “suffered loss and damage” of 58.6 million euros as a result of the cancellation of the IPO. Citi disputed this.
In its defense filing, Citi said there was “insufficient investor appetite to proceed with the proposed IPO” and that the deal “could not proceed if only smaller hedge fund investors were willing to participate or if the commitments of larger investors were relatively small”.
The bank also said that while it agreed to coordinate early investor meetings for the proposed deal, dubbed “Project Alphabet,” it never entered into a “legally binding agreement” to act as sole global coordinator.
Alcimos was placed into receivership in October following a creditors’ petition, according to Companies House filings.
The case has been referred to the Official Insolvency Authority, part of the UK government’s insolvency office, which is now responsible for running the company’s affairs and liquidation, according to a person familiar with the matter. A spokesman for the official receiver said he did not comment on “ongoing cases”.
Separately, Alcimos’ sister company, which specializes in contracting and finding litigation funding, last year coordinated the request for investors stung by the failure of Greensill Capital.
Citi declined to comment.
