Lehman Sues Intel Corporation (INTC) Over $1 Billion Deal

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 Lehman Sues Intel Corporation (INTC) Over $1 Billion Deal

Lehman Brothers Holdings Inc. (OTCMKTS:LEHMQ), the bankrupt investment bank, filed a suit against the largest chipmaker Intel Corporation (NASDAQ:INTC) and has framed allegations that the chip maker violated a swap agreement worth $1 billion.

In August 2008, under an agreement, Intel gave $1 billion to Lehman’s over the counter derivative units, in exchange for 50 million of its shares, which was to be delivered on September 29, 2008, as per the complaint filed in the U.S. Bankruptcy Court, in Manhattan.

Lehman Brothers Holdings Inc. (OTCMKTS:LEHMQ) posted $1 billion in cash collateral, which implied that if the agreement is terminated before the due date then Intel will receive compensation for its losses.

Intel Corporation (NASDAQ:INTC) broke the agreement two weeks after Lehman filed for bankruptcy protection on Sept. 15, 2008. Intel not only ended the deal but also seized the $1 billion in cash collateral and refused to return it back to Lehman even though the losses incurred by Intel were far less than $1 billion, says Lehman in the court filing. Lehman is seeking for repayment, plus interest.

In the court filing, Intel Corporation (NASDAQ:INTC) has stated that Lehman was to give $1 billion in Intel common stock, “but contrary to that Lehman said that it had to deliver 50.5 million on Intel shares irrespective of dollar value as per the agreement.”

“The value of 50,552,943 shares of Intel common stock on September 29, 2008 was about US$873 million, not US$1 billion,” Lehman said. Lehman is saying that by seizing the full collateral, Intel is in breach of the swap agreement.

Intel Corporation (NASDAQ:INTC)’s spokesman Chuck Mulloy said that the company is aware of the allegations made and that they are going through the matter and is not in a position to say anything further at this point in time.

Lehman Brothers Holdings Inc. (OTCMKTS:LEHMQ) is the biggest institution to file for bankruptcy in the history of the United States. The bank gave away $36.7 billion to creditors. What remains of $65 billion in bankruptcy debt will be distributed by 2016 according to the bank.

If the chip maker loses this case, it might impact the company in a big way, considering the position in which the company is presently.

The case is Lehman Brothers Holdings Inc. v. Intel Corp., 13-1340, U.S. Bankruptcy Court, Southern District of New York.

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About the Author

Aman Jain
Aman is MBA (Finance) with an experience on both Marketing and Finance side. He has worked as a Risk Analyst for AIR Worldwide, and is currently leading VeRa FinServ, a Financial Research firm. Favorite pastimes include watching science fiction movies, reviewing tech gadgets, playing PC games and cricket. - Email him at [email protected]

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