Citi and Mercuria, the Swiss-based commodity trader, have settled a long-running legal dispute over a $270m metals financing deal that went sour in China.
“Citi and Mercuria are pleased to confirm that they have reached a commercial resolution in respect of all issues between them relating to the historic base metal transactions in Qingdao and Penglai. This brings to an end the legal dispute between them,” the US bank said in a statement, reports Neil Hume in London.
The dispute between centres on metals-backed sale and repurchase transactions that were made in 2014.
Under a “repo”, a trader sells metal to a bank with an agreement to buy it back at a later date for a slightly higher price. The difference is effectively interest.
Mercuria and Citi were in the midst of several of these deals when the Chinese authorities sealed the ports so they could start to investigate claims of fraud involving a company called Dezheng Resources.
The warehouses have been in lockdown ever since and neither party has been able to assess their exposure to the alleged fraud.
Last year, the High Court in London said Citi could not reclaim $270m it lent to Mercuria in the deal. But in a complex ruling, the court also found that Citi had been within in its rights to demand early repayments of the loans.
This set up the prospect of further legal action with Citi saying it would seek compensation from Mercuria for failure to safeguard the metal once “further facts” had been established.
Citi did not disclose the details on Monday’s resolution.
Mercuria could not be immediately reached for comment. The company, one of the world’s largest commodity traders, took more than $200m of charges and provisions in its last fiscal last year.
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