UBS to pay $120 million settlement over Lehman structured notes

By Jim Witters

Wilmington, Del., Aug. 9 - UBS Financial Services, Inc. has agreed to pay $120 million to settle litigation with a group of investors who accused UBS of misleading them about Lehman Brothers Holdings Inc.'s financial condition while selling the investors Lehman's structured notes.

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

The structured products class representatives are seeking preliminary approval of the UBS settlement from the U.S. District Court for the Southern District of New York, according to an Aug. 8 filing.

A preliminary order authorizes the parties to provide notice of the settlement to the members of the class and schedules a settlement hearing.

The proposed preliminary order also would modify - for settlement purposes only - the court's class certification order to include all 84 offerings of Lehman structured products sold by UBS Financial Services.

The proposed agreement is the product of negotiations that included "a highly qualified mediator" after nearly five years of litigation, the filing states.

The parties reached agreement in June and spent the past two months negotiating the specific terms of the settlement.

The class representatives say the $120 million settlement represents a recovery of 13.4% of the total face value of the structured products and 15% of the class' maximum recoverable statutory damages of $773 million.

"The settlement compares favorably with other recoveries in 'credit crisis' securities actions, and gives purchasers of structured products who suffered damages an opportunity to share in the recovery. The parties believe the settlement is fair, reasonable and adequate," according to the filing.

Under the proposed schedule, notice would be sent to class representatives 21 days after the entry of a preliminary order, and a settlement hearing would be conducted on Nov. 15.

The structured products class representatives have requested an Aug. 13 hearing on the motion for a preliminary order.

The UBS action is under case No. 09-MD-2017 in the U.S. District Court for the Southern District of New York.

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