DEG, an investment arm of the German government, has obtained a lien of 3.2 million euros on funds of MCB Bank in Commerz Bank in Germany, it is reliably learnt. The German emerging market investment arm had taken equity investment in Orient Power Pvt Ltd, an independent power producer (IPP).
DEG had reportedly provided bonds issued by Lehman Brothers of the US to a consortium of Pakistani banks funding the project, which had HBL as the lead bank while MCB Bank as custodian. According to the DEG plaint, it had served notice on MCB to substitute the security (Lehman paper), but the custodian took extraordinary time in implementing this order. Meanwhile, Lehman went into liquidation, and DEG was not able to encash the bond returned by the MCB on time.
As a result, the German investor incurred a loss. A notice from a German court was served on the Pakistani institution over Christmas/ New Year holidays. The court allowed the request to freeze MCB funds equivalent to 3.2 million euros. MCB is now reportedly contesting as a respondent in the case.
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