Citigroup, the underwriter of the Liberty CLO put in place in 2005, approached Highland Capital about liquidating the fund, Highland said in a state court filing Thursday in Dallas County, Texas. After the firm refused, Citigroup sought to remove Highland as portfolio manager and replace it with Babson Capital, the manager said in the filing.
“Citi is demanding that we violate the terms of the Liberty CLO portfolio management agreement,” Stefan Prelog, a spokesman for Highland, said in an e-mailed statement. “Given Citi’s clear disregard for the agreement and harm caused to Liberty’s other investors and Citi’s own clients, our only option is to take legal action.”
Bank of New York Mellon is the fund’s trustee.
Danielle Romero-Apsilos, a spokeswoman for Citigroup, and Kevin Heine, a BNY Mellon spokesman, declined to comment on the lawsuit. A Babson spokesman couldn’t be reached for comment.
Highland recently completed the sale of the management contracts on €2.1 billion ($2.7 billion) of European CLOs to Carlyle Group.