Lehman Europe, Lehman Brothers settlement terms effective as of June 7

By Caroline Salls

Pittsburgh, June 7 - Lehman Brothers International (Europe) (LBIE)'s joint administrators said all conditions to the effectiveness of a settlement between Lehman Brothers Inc. and LBIE have been satisfied.

According to a news release, the common terms of the settlement became effective as of June 7.

The joint administrators said they will provide further updates ahead of a first interim distribution, including providing notification once LBIE has liquidated 90% by value of the securities portfolio due to be received from Lehman and providing an update before the end of June on the timing of that distribution and expected participants.

The joint administrators announced in April that the required thresholds for an amendment to LBIE's claim resolution agreement and for the omnibus settlement had been exceeded.

As previously reported, the U.S. Bankruptcy Court for the Southern District of New York approved the settlement with Lehman Brothers Inc.'s trustee on April 16.

Agreement terms

The key terms of the Lehman/LBIE agreement, which are consistent with terms agreed in principle in October 2012, 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; and

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

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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