The trail of Lehman Brothers Holdings Inc. (OTCMKTS:LEHMQ)’s debt and disputes has found no end yet. In a renewed battle in court, the now defunct brokerage says that it is entitled to billions of dollars from its sale to Barclays PLC (NYSE:BCS) (LON:BARC), Reuters reports.
Lehman Brothers Fighting With Barclays:
Lehman Brothers Holdings Inc. (OTCMKTS:LEHMQ) is fighting with Barclays over more than $2 billion in an appeals court, presided over by a panel of three judges, Peter Hall, Gerard Lynch and Ralph Winter. Lehman alleges that when Barclays PLC (NYSE:BCS) (LON:BARC) bought assets of Lehman, the sale specifically excluded all kinds of cash. William Maguire, representing Lehman Brothers, said that the deal excluded all cash. Barclays has defended its right by arguing that the clarification letter that was signed by both parties after the September 2008 sale was approved, which gives the bank the right to disputed assets.
The assets under question include margin accounts which could be up to $5 billion, $2 billion to support clearance of securities trading and $769 million which was agreed as payment to Barclays if Lehman’s clients were compensated fully.
Lehman’s trustees are also embroiled on other fronts. Lehman Brothers Holdings Inc. (OTCMKTS:LEHMQ) has filed a suit against Intel Corporation (NASDAQ:INTC) that it breached a swap agreement worth $1 billion that was signed by both parties in August 2008. Barclays is also stuck with Lehman indirectly in another battle where Citigroup Inc (NYSE:C) has filed suit against the British bank for wrongful losses in Lehman’s asset sale.
The current court case has been previously ruled on twice. In 2011, Judge James Peck ruled that Barclays was entitled to the clearance assets whereas Lehman should keep the margin accounts. Peck had also approved the $250 million sale agreement in 2008, when the brokerage had filed for a $639 billion bankruptcy.
Peck’s decision was ruled over by Judge Katherine Forrest in 2012, who said that Barclays had claim to both clearance and margin assets. The latest tussle has focused on the margin assets which amount to about $2 billion. Maguire, who is representing Lehman Brothers’ trustee James Gidden, has said that while the original deal excluded cash assets, the clarification letter that followed amounted to an asset grab by Barclays PLC (NYSE:BCS) (LON:BARC).
Barclays’s lawyer, David Boies has taken the position that the clarification letter was an explanation of the deal and included no new terms.
General creditors of Lehman debt are expected to benefit from a favorable ruling in this case. The claimants include hedge funds, former employees, pension funds and Lehman affiliates.