Lehman, Lehman Europe deal OK'd by U.S. court; English hearing set

By Caroline Salls

Pittsburgh, April 25 - Lehman Brothers International (Europe) (LBIE)'s joint administrators said the U.S. Bankruptcy Court for the Southern District of New York approved a settlement with Lehman Brothers Inc. (LBI)'s trustee on April 16.

According to a joint administrators' news release, the settlement was uncontested at the hearing.

The settlement is also subject to approval by the English High Court. The joint administrators said they filed a supplementary witness statement in support of the application in the English High Court on Thursday.

A hearing is scheduled for May 1 in the English High Court.

As previously reported, Lehman Brothers Holdings Inc. (LBHI), LBI and LBIE reached milestone agreements in February that resolve billions in intercompany claims and clear the path for additional distributions to LBI and LBIE customers and LBHI creditors.

Specifically, the trustee for LBI, LBHI and some of its debtor and non-debtor subsidiaries and the joint administrators of LBIE entered into two separate agreements settling all intercompany claims.

The Lehman entities said these separate agreements settle billions of dollars of complex intercompany claims and liabilities between the parties and provide a final resolution of all legal and factual issues regarding intercompany relationships between LBI and LBHI and between LBI and LBIE.

LBI/LBHI agreement

Key terms of the LBI/LBHI agreement include the following:

• LBHI's customer claims against LBI will be allowed in an amount of $2.32 billion. LBHI will receive a cash distribution of $1,977,000,000 from the LBI estate, which includes cash in lieu of securities and cash receipts from post-petition redemptions and maturities in connection with securities, $350 million of consideration from Lehman ALI Inc. in the form of an assignment of a settled intercompany note and the return of securities from the LBI estate;

• LBI will allow LBHI a claim for post-bankruptcy dividends and interest through Dec. 31, 2013, of about $122 million, as well as any other post-bankruptcy dividends and interest collected by the trustee for securities that make up LBHI's allowed customer claims;

• LBI will allow LBHI a $240 million priority unsecured claim in connection with tax-related disputes resolved through the settlement;

• LBHI will be allowed general unsecured claims of $13,984,000,000, including $1.5 billion related to a subrogated claim by JPMorgan against LBI; and

• The settlement is conditional on the trustee achieving 100% payout on remaining customer claims.

LBI/LBIE agreement

Meanwhile, the key terms of the LBI/LBIE agreement, which are consistent with terms agreed in principle in October, include the following:

• LBIE's omnibus customer claim against LBI will be allowed in an amount of $7.5 billion, valued as of Sept. 19, 2008. Taking a Nov. 30, 2012 value date, LBIE values the settled claim at $8.4 billion made up of cash and securities, and this claim will be augmented by roughly $600 million in post-filing income;

• LBIE's house claim against LBI will be allowed in an amount of $500 million in cash as a customer claim and a further amount of $4 billion as a general estate claim. LBI's unsecured claim against LBIE will be eliminated entirely;

• LBI's client money claim against LBIE and the former's custodied assets held by LBIE will be assigned to LBIE's nominee and LBIE, respectively;

• LBI will create a $777 million reserve to deal with claims into LBIE from Barclays arising from the LBI/Barclays September 2008 asset purchase agreement;

• All litigation will cease between the parties and all other claims will be released; and

• The settlement is conditional on the elimination of duplicate claims filed by claimants into the LBI estate, the trustee achieving 100% payout on remaining customer property claims, the approval of a post-filing income methodology, approval of the trustee's allocation motion to identify the amount of realizations to be credited as customer property and the receipt of court approvals.

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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