Business

Barclays And Lehman Brothers (Finally) Settle Brokerage Debt

It’s been a long time coming, but megabank Barclays and the trustee for Lehman Brothers have finally reached a settlement regarding margin assets held by the brokerage when it was sold to Barclays back in 2008. As a part of the just-announced settlement, Lehman will pay Barclays $1.28 billion for the margin assets it owed to the financial institution.

Barclays And Lehman Brothers (Finally) Settle Brokerage Debt

More on the Barclays and Lehman settlement

The legal tussle was related to the assets that accrued to Barclays when it bought Lehman’s U.S. brokerage unit in bankruptcy proceedings during the financial crisis in September 2008, and a “secret discount” and the fact the deal was forced to happen so quickly were a key contentions in the 2010 trial.

The settlement calls for both sides to drop current and future litigation against one another, according to a filing with U.S. Bankruptcy Court in Manhattan. The good news is close to $600 million cash will become available for Lehman creditors, because the trustee had earmarked around $1.87 billion for the dispute. Both sides agreed that the payment is $80 million less than the trustee would have had to pay if a settlement had not been reached.

The courtroom battle over the Lehman deal first came to fore in 2009, when Lehman sued Barclays, claiming the bank negotiated a secret discount when it made the deal for Lehman’s brokerage in 2008.

U.S. Bankruptcy Judge Shelley Chapman will decide whether to accept the deal at a hearing at the end of this month.

Statements from the parties

“This agreement ends years of litigation and achieves the best result under the circumstances as winding-down and closing out the estate continues in earnest,” noted Lehman trustee James W. Giddens, who had continued to appeal the case all the way up to the U.S. Supreme Court, which recently declined to hear the case.

“Barclays fought hard and responsibly through six years of litigation to secure approximately $8 billion of purchased yet disputed assets, and today’s settlement brings that effort to a successful completion,” commented Jonathan Schiller of Boies Schiller & Flexner, the lead attorney for Barclays.