LONDON May 15 The Portuguese government and JP
Morgan Chase & Co are attempting to resolve a tussle
over potentially costly derivative contracts sold by the U.S.
investment bank to state-owned companies.
One source familiar with the situation, who spoke on
condition of anonymity, said talks had begun after both sides
threatened legal action over a series of complex hedging
products described as "toxic" by Lisbon.
No further information was immediately available.
The row between JP Morgan and Lisbon, which is trying to
stem potential losses of up to 3.0 billion euros ($4.0
billion)from complex hedging products sold to companies such as
the Lisbon and Porto Metro, echoes similar battles in countries
such as Italy as bank clients say they were missold products.
JPMorgan launched a London lawsuit as a "protective measure"
after Portugal's cash-strapped government vowed on April 26 to
challenge in court swap contracts with JP Morgan and the local
unit of Spain's Santander.
Metro firms, alongside other publicly-owned entities, signed
derivative contracts between 2003 and 2010 with banks such as
Credit Suisse, Deutsche Bank, BBVA
and Merrill Lynch to protect
against any rise in Euribor-based interest rates.
But rates slumped in the past few years, leaving those
companies on the wrong side of the bet.
Treasury Secretary Maria Luiz Albuquerque said last month
the government had managed to renegotiate swap contracts
containing "highly speculative elements" with some banks,
cutting by 20 percent potential liabilities from swaps that
could total 3 billion euros.
Officials at Santander did not respond to phone messages or