Barclays fires back at Lehman sale claims, wants undelivered assets

By Caroline Salls

Pittsburgh, Jan. 29 - Barclays Capital Inc. filed a 325-page brief Friday in opposition to Lehman Brothers Holdings, Inc.'s claim that Barclays received $8.2 billion more than it should have in the September 2008 sale of Lehman's assets, arguing that the company's claims are "based upon a series of distortions and fictions," according to a filing with the U.S. Bankruptcy Court for the Southern District of New York.

As previously reported, Lehman asked the court in September to modify the asset sale order after the company found out that Barclays received at least $5 billion of excess collateral under a repurchase agreement, $2.7 billion in additional value added to the deal at Barclays' demand and $2.3 billion in margin deposits added after the sale hearing, less the $1.738 billion of liabilities Barclays actually assumed.

The company said the amount could be larger than $8.2 billion.

In the objection filed Friday, Barclays called the company's motion to rewrite the sale agreement "nothing more than a blatant attempt to breach both the sale order and the purchase agreement."

"The debtor and [trustee the Securities Investor Protection Corp.] owe Barclays billions of dollars of assets that are specifically identified in the purchase agreement," Barclays said in its response.

"The debtor effectively admits that the purchase agreement entitles Barclays to these assets, but now asks the court to rewrite the agreement, so that the Lehman estates may avoid their contractual obligations."

Recommendations affirmed

According to the objection, Harvey Miller of Weil Gotshal & Manges and Barry Ridings of Lazard, the two professionals who asked the court to approve the sale of Lehman's behalf, both stand by their recommendations to the court that the Barclays sale was the best deal for Lehman's estates.

In addition, Barclays said Miller and Ridings both believe the Lehman executives involved in the sale acted in good faith.

Barclays said Weil Gotshal also presented the court with an asset purchase agreement that clearly provided for the acquisition of all of the assets used in Lehman's business other than specified excluded assets.

No secret discount

The purchaser said the secret discount that Lehman claims Barclays received "was neither secret nor a discount."

"The discount described throughout [Lehman's motion] is not a discount from fair market value, but rather an attempt to adjust from stale Lehman marks to fair market value," Barclays said.

Additionally, Barclays said the alleged additional assets "were defined as purchased assets in the plain text of the contract."

Barclays said the court does not need to hold an evidentiary hearing, but it should instead enforce the plan terms of the purchase agreement and order Lehman to deliver to Barclays assets that have not yet been delivered.

Sale brought stability

The buyer said the court "correctly approved this historic transaction."

"In doing so, the court helped provide some measure of stability to the growing panic throughout the world's financial markets," Barclays said.

"The court's approval allowed the prompt transfer of over 72,000 customer accounts to Barclays, providing them with a solvent broker-dealer through which they could access their accounts, avoiding what might otherwise have been a contagion of even greater panic and uncertainty.

"And, as the court was told at the time, the court's approval maximized the value to the Lehman estates of the wasting assets that were sold - avoiding potential losses in the hundreds of billions of dollars."

A hearing is scheduled for March 25.

New York-based Lehman Brothers Holdings Inc. was the fourth-largest investment bank in the United States. The company filed for bankruptcy on Sept. 15, 2008. Its Chapter 11 case number is 08-13555.

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