Lehman settles nearly $100 million in derivatives, guarantee claims

By Caroline Salls

Pittsburgh, Nov. 9 - Lehman Brothers Holdings Inc. and Lehman Brothers Special Financing Inc. requested court approval of two settlements that resolve nearly $100 million in derivatives claims and derivatives guarantee claims, according to a filing with the U.S. Bankruptcy Court for the Southern District of New York.

Specifically, the Lehman entities are seeking approval of a termination and settlement agreement with Elliott Associates, LP and Alston Investments LLC and a termination and settlement agreement with Elliott International, LP and Ashton Investments LLC.

Alston and Ashton filed the derivatives and derivatives guarantee claims against Lehman, the motion said.

Alston has agreed to reduce its primary derivatives claim and its guarantee derivatives claim by $17.3 million, representing a 42% reduction of the claim amounts.

Meanwhile, Ashton has agreed to reduce its claims by $25.9 million, representing a 45% reduction.

Lehman said Alston will have $24.23 million allowed non-priority general unsecured claims against each of the two Lehman entities, and Ashton will have $32.26 million allowed non-priority general unsecured claims.

According to the motion, Lehman Brothers Special Financing was a party to transactions governed by ISDA master agreements with Elliott Associates.

The transactions included various interest rate swap transactions, single-name, index and tranched index credit derivatives, index trades on asset-backed securities and single-name credit default swaps on European residential mortgage-backed securities.

Elliott assigned and transferred its claims to affiliates Alston and Ashton in June, according to court documents.

A hearing is scheduled for Nov. 30.

New York-based Lehman Brothers Holdings 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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