UAE bank eyes support in lawsuit over U.S. fund

DUBAI, Aug 26 (Reuters) - A United Arab Emirates bank said on Tuesday it expected other Gulf Arab investors to back a lawsuit it has filed against major U.S. financial institutions over a fund that collapsed in the U.S. credit crisis.

Abu Dhabi Commercial Bank ADCB.AD, which is majority owned by the Abu Dhabi government, filed a suit against Morgan Stanley (MS.N), the Bank of New York Mellon Corp (BK.N) and ratings agencies Moody's and S&P on Monday, accusing them of fraud, the lawsuit showed.

The lawsuit filed in U.S. district court in Manhattan said a complex deal known as the Cheyne Structured Investment Vehicle (SIV) was marketed by the defendants as highly rated and reliable, but that they had hidden the risks.

ADCB said in a statement on Tuesday it had also held talks with other banks and investors in the six-member Gulf Cooperation Council about joining its class action and expected more investors to either join or support the case.

It did not name the other investors.

"This is the next step in a process aimed at recouping the losses ADCB has already incurred, and additionally, this is an important step in paving the way for other GCC investors to ensure they are provided an opportunity to recover their own losses," ADCB Chief Executive Officer Eirvin Knox said.

"ADCB has taken a proactive early lead to protect itself and other investors."

SIVs, which once held some $350 billion in assets, have played a major role in the U.S. credit crisis, after proving unable to refinance their short-term debts.

A series of SIVs are now selling off bank debt and assets such as asset-backed securities to try to pay back investors, a move that many see as further pressuring credit markets.

A deal was announced last month to restructure Cheyne, which at receivership was a $7 billion fund.

A spokeswoman for Morgan Stanley and a spokesman for Bank of New York Mellon in the United States declined to comment on Monday. A spokesman for S&P parent McGraw-Hill Cos Inc (MHP.N) declined comment on Monday, saying the company had not yet been served with the complaint. A spokesman for Moody's Corp (MCO.N) was not immediately available for comment at the time.

SIVs used short-term funding, such as asset-backed commercial paper, to buy longer-term assets such as bank debt and asset-backed securities.

The bank brought the action on behalf of all investors who bought investment grade Mezzanine Capital Notes issued by Cheyne Finance PLC and its wholly owned subsidiary Cheyne Finance Capital Notes from October 2004 to October 2007. (Reporting by Lin Noueihed)