Facing losses of nearly $100 million from lending to a now-defunct hedge fund, ABN Amro Holdings could see its $386 million deal to sell its global futures business to Swiss investment bank UBS AG collapse as well.
ABN Amro has been aggressively lending to hedge fund run by former New York Mercantile Exchange President Robert “Bo” Collins, which has since been decimated.
The Dutch banking giant’s deal with UBS, struck in May, will not close until October, but its losses will likely prompt changes to the agreement that could result in voiding the deal or significantly lowering the price. ABN Amro’s global futures business is now worth far less, and it also leaves ABN’s risk-management skills open to questions.
Motherrock, the hedge fund run by Collins, crashed last week, reportedly losing nearly all of its investors’ $450 million taking an ill-fated gamble on natural gas.
ABN brokered trades for Motherrock and allowed the fund to trade using massive amounts of borrowed money, leaving the bank more than 1 million futures and options contracts on natural gas.