Italy's Milan sues four banks over derivatives

MILAN Sat Jan 24, 2009 12:17pm EST

MILAN Jan 24 (Reuters) - The Italian city of Milan has filed a suit seeking damages from UBS UBSN.AX, Deutsche Bank (DBKGn.DE), JPMorgan Chase & Co (JPM.N) and Depfa Bank over the sale of derivatives contracts tied to a 2005 bond issue, the city said in a statement.

Milan, Italy's financial and industrial capital, gave no details of how much it was seeking in compensation.

The bond issue was worth 1.7 billion euros ($2.2 billion). A study commissioned by the city in the middle of last year -- before the global financial crisis worsened in September -- had estimated that losses were about 298 million euros on the derivatives.

Spokesmen for UBS, Deutsche Bank and Depfa declined to comment. A spokesman for JPMorgan could not be immediately reached.

The derivatives swapped a fixed rate of interest on the bonds for a variable rate and enabled the city to repay the debt in yearly installments.

(Reporting by Ian Simpson; editing by Dominic Evans)