A prospective class action suit has been filed against Fairfax Holdings Ltd., alleging the company omitted damaging information in its debt prospectus.
The complaint filed against the Toronto-based company Friday in U.S. District Court in Manhattan alleged the firm failed to detail its increasing liquidity problems and its growing exposure to finite reinsurance accounting investigations.
The New York-based law firm of Murray, Frank & Sailer LLP filed the suit on behalf of all who purchased debt securities of Fairfax Holdings Ltd. between March 24, 2004 and March 21 of this year.
Fairfax owns 80 percent of Odyssey Re, a Stamford, Conn.-based reinsurer that faces an ongoing federal investigation in regard to finite reinsurance accounting. According to Fitch Ratings the inquiry could result in a civil action against the company.
The debt-holder complaint against Fairfax alleged that the company failed to detail a second-quarter 2004 transaction between Odyssey and Fairfax "and to explain that the arrangements were structured to avoid a liquidity squeeze at Fairfax that would have occurred during the quarter."
The complaint also alleged Fairfax failed to detail its highly leveraged balance sheet, along with whether its reserves were adequate to address the company's growing runoff operations.
© Arc, All Rights Reserved. Request academic re-use from www.copyright.com. All other uses, submit a request to TMSalesOperations@arc-network.com. For more information visit Asset & Logo Licensing.