Lehman trustee eyes settlement of $187 million in Pimco client claims

By Kali Hays

New York, Jan. 2 – Lehman Brothers Inc.’s liquidation trustee, James W. Giddens, is seeking approval of a settlement with Pacific Investment Management Co. LLC (Pimco) resolving $187.4 million in customer reserves, according to a Dec. 31 motion with the U.S. Bankruptcy Court for the Southern District of New York.

Putting an end to disputes over 81 Pimco customer claims related to property transferred as “forward collateral” in a master securities forward transaction agreement between Pimco and Lehman, the settlement allows $146.6 million in general unsecured claims against Lehman and a cash settlement payment to Pimco of up to $20 million.

The settlement also calls for a release to certain Pimco clients of $25.6 million in collateral in respect to the claims and the release of excess collateral totaling $4.9 million to the Lehman estate, according to the motion.

Any objections of Pimco or its clients to the classification of claims will be withdrawn.

Giddens said that the settlement will “fully resolve” the Pimco claims which “comprise the vast majority of the remaining disputed customer claims and will avoid burdening the estate with the costs and delays of potentially extensive litigation,” according to the motion.

A hearing is set for Jan. 22.

New York-based Lehman Brothers Holdings Inc. was the fourth-largest investment bank in the United States. The company emerged from bankruptcy on March 6, 2012.

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