One of Spain’s biggest hotel groups is suing Deutsche Bank for €500m in damages over the alleged mis-selling of risky foreign exchange derivatives that it says left it with crippling losses.
The claim, which was filed last month to the High Court in London, is the latest escalation in a scandal involving accusations that Deutsche sold exotic financial products to small- and medium-sized companies in Spain, pushing some into financial distress.
Some alleged victims are companies that are part of the Ibiza-based Palladium Hotel Group, Spain’s seventh-largest hotel chain, which claims that Deutsche took advantage of its naivety to sell it derivatives that it did not understand.
Deutsche told the Financial Times that it will defend itself “vigorously” against Palladium’s claim, which it said is “without foundation”.
The German lender also stressed that the lawsuit from Palladium was an isolated one and it considered it to be different to those it had settled in the past. “We see no reason to expect any further individual claims of anything like this size,” it said.
The wider allegations have led to the departure of two senior Deutsche bankers and out-of-court settlements, including a €10m payout to Europe’s largest wine exporter, J García-Carrión.
Deutsche is conducting its own internal probe into the allegations, codenamed “Teal”. The bank says only “a limited number of clients” are directly affected but it is investigating whether others might have been subject to similar issues. The FT has reported that between 50 and 100 companies could be involved.
Palladium — which operates 50 hotels in Europe and the Americas, including the Ushuaïa Ibiza Beach Hotel and Hard Rock Ibiza — says the complex derivatives it bought from Deutsche were touted as safe hedges against foreign exchange fluctuations, as well as changes in interest rates.
However, the family-owned group alleges it resulted in fees and losses “so large that [it] had to take out substantial loans” to cover them.
By 2019 Palladium had entered into 259 derivatives transactions. At their peak in 2017, they involved an outstanding notional amount — the total amount that the contracts reference — of €5.6bn, a sum that eclipsed the balance sheet of the hotel group, according to the lawsuit.
That compares with Palladium’s consolidated sales of about €700m a year and its annual earnings before interest, taxes, depreciation and amortisation of more than €150m.
According to the lawsuit, the deals were put together for Palladium by Antonio Matutes Juan, the 78-year-old brother of the company’s founder, Abel Matutes Juan, a former European Commissioner and Spanish foreign minister, who remains chair of the hotel group.
Although the multinational is one of the larger and more sophisticated corporates in dispute with Deutsche, Palladium’s US lawyers, Quinn Emanuel, argue that the company lacked both the expertise as well as the tools to…
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