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Lehman June 30
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Lehman Brothers, Barclays Settlement Approved by Bankruptcy Judge
Jun 29, 2015 | The Wall Street Journal
By Joseph Checkler
A judge on Monday approved a settlement in the long-running legal fight between Lehman Brothers Inc. and Barclays PLC, punctuating one of the more intriguing sagas of Lehman's collapse and its aftermath. Judge Shelley C. Chapman of U.S. Bankruptcy Court in Manhattan said the deal, which calls for Lehman to pay... -
$1.3B Lehman, Barclays Settlement Gets Judicial Nod
Jun 29, 2015 | Law360
By Jonathan Randles
A New York bankruptcy judge approved a settlement Monday that will see Lehman Brothers Inc. pay Barclays Capital Inc. nearly $1.3 billion to resolve a dispute over the sale of the collapsed investment bank's brokerage business, saying it will benefit Lehman creditors. U.S. Bankruptcy Judge Shelley Chapman said the settlement... -
Lehman 'Repo' Clients Are Not Customers - U.S. Appeals Court
Jun 29, 2015 | Reuters
By Jonathan Stempel
A U.S. appeals court said banks that enter repurchase agreements with brokerages do not qualify as "customers" entitled to special legal protections when those brokerages fail, in a case arising from Lehman Brothers Holdings Inc's 2008 bankruptcy. Monday's decision by the 2nd U.S. Circuit Court of Appeals may free James Giddens... -
Appellate Court Sides With Lehman in Repo Fight With Bank
Jun 29, 2015 | Dow Jones - Daily Bankruptcy Review
By Patrick Fitzgerald
A federal appellate court Monday said certain repurchase agreements don't qualify for "customer status" in a failed brokerage business, a win for the trustee winding down Lehman Brothers Inc . in his long-running fight with one of the broker-dealer's banks. A three-judge panel of the U.S. Second Circuit Court... -
Lehman Claimant Lacks SIPA Customer Status, 2nd Circ. Says
Jun 29, 2015 | Law360
By Ben Conarck
The Second Circuit on Monday found that British investment manager CarVal UK Ltd. does not have customer status under the Securities Investor Protection Act to pursue $44 million in repurchase transaction claims from Lehman Brothers Inc., saying that the agreements did not create a fiduciary relationship. -
How Greece Could Go Down Like Lehman Brothers
Jun 29, 2015 | Fortune
By S. Kumar
...Today’s situation brings to mind an argument that some economists have posed over the past few years: Greece’s financial disaster could be as bad, if not worse, than Lehman Brothers, the storied investment bank that collapsed in 2008 and sparked a market panic that quickly spread through the entire U.S. financial system...
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Barclays PLC
Repo Agreement
CarVal UK Ltd.
Comment - Greece
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Lehman Brothers, Barclays Settlement Approved by Bankruptcy Judge
Jun 29, 2015 | The Wall Street Journal
By Joseph Checkler
A judge on Monday approved a settlement in the long-running legal fight between Lehman Brothers Inc. and Barclays PLC, punctuating one of the more intriguing sagas of Lehman's collapse and its aftermath.
Judge Shelley C. Chapman of U.S. Bankruptcy Court in Manhattan said the deal, which calls for Lehman to pay Barclays$1.28 billion for so-called margin assets tied to Barclays's purchase of Lehman's brokerage business in 2008, was "fair and equitable."
"The settlement agreement as a whole is in the paramount interest of the creditors," Judge Chapman said. The settlement was announced earlier this month.
The legal battle over the assets, which climaxed in a 34-day trial back in 2010, ends with both sides agreeing to drop all litigation against the other.
More than $580 million cash will become available for Lehman creditors, because Lehman had set aside about $1.87 billion for the dispute. Both Barclays and James W. Giddens, the trustee unwinding Lehman's brokerage, have said the payment is about $80 million less than Mr. Giddens would have had to pay without a settlement.
Hughes Hubbard & Reed LLP's Sam McCoubrey, a lawyer for Mr. Giddens, said that while he would have preferred to prevail in court, the settlement was best "based on where we are today."
"We are pleased the Court approved this agreement, as it ends years of litigation and achieves the best result under the circumstances," Mr. Giddens said. "Winding-down and closing the estate continues in earnest, and we will continue efforts to appropriately distribute available assets from the general estate."
When the deal was announced earlier this month, Barclays said it expects the settlement to fetch it a pretax gain of about $750 million in its 2015 interim results, which will be announced July 29.
The fight over the sale to Barclays began in 2009, when the Lehman brokerage and its parent company both sued Barclays, saying the British bank negotiated a secret discount when it bought Lehman's brokerage.
The dispute came down to a "clarification letter" that was agreed on by the two sides in the hectic days of September 2008 but never was reviewed by James Peck, the judge who was then overseeing Lehman's bankruptcy case. The judge ultimately decided, while he didn't approve the terms of the letter explicitly, all parties involved treated it as if he had. The letter spelled out the terms of which assets would go to Barclays and which would stay with Lehman.
While Judge Peck had said in court that "no cash" could be transferred from Lehman to Barclays, some assets that the trustee later construed as cash did end up being transferred, per the letter. After the trial, the judge ultimately concluded that Barclays didn't receive an improper "windfall" from the sale but that Lehman's brokerage was entitled to the approximately $4 billion in money described as margin assets.
Later, however, a three-judge court of appeals panel said "ambiguities and loose ends were inevitable" in such a speedy sale and ruled that Barclays was entitled to these disputed assets. Lehman appealed to the U.S. Supreme Court, which declined to hear the case.
Lehman collapsed into the biggest bankruptcy in history in 2008. Since then, the investment bank and its brokerage have sorted out claims and reached settlements in an effort to pay back creditors as much as possible...
For full story:
http://www.wsj.com/articles/lehman-brothers-barclays-settlement-approved-by-bankruptcy-judge-1435605763
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$1.3B Lehman, Barclays Settlement Gets Judicial Nod
Jun 29, 2015 | Law360
By Jonathan Randles
A New York bankruptcy judge approved a settlement Monday that will see Lehman Brothers Inc. pay Barclays Capital Inc. nearly $1.3 billion to resolve a dispute over the sale of the collapsed investment bank's brokerage business, saying it will benefit Lehman creditors.
U.S. Bankruptcy Judge Shelley Chapman said the settlement, reached after LBI had lost long-running litigation over the sale, was fair and reasonable under the circumstances because it will free up about $580 million that the estate has had to hold in reserve to cover liability related to its dispute with Barclays.
The LBI trustee announced the deal earlier this month after the U.S. Supreme Court declined to take up the estate's appeal over the Barclays case. At the time the deal was announced, LBI liquidating trustee James Giddens indicated that resolution of the case marked a significant milestone in winding down the firm's affairs.
The only objection to the settlement was filed by former LBI employee J. Robert Chambers who said he was due a $43 million bonus for work and his team did in the years before Lehman collapsed in 2008. Chambers objected to a release in the settlement that shields Barclays from future litigation over unpaid employee bonuses and severance payments....“I can't fix things that occurred in the past,” Judge Chapman said.
The settlement was announced several months after the Second Circuit largely sided with Barclays. The appellate panel upheld U.S. District Judge Katherine B. Forrest’s interpretation of the complicated contracts surrounding Barclays’ 2008 deal for LBI, which were hastily pushed through amid widespread market panic in the aftermath of the collapse of its parent Lehman Brothers Holdings Inc.
The Supreme Court declined to review the Second Circuit's ruling.
“We are pleased the court approved this agreement, as it ends years of litigation and achieves the best result under the circumstances,” LBI trustee James Giddens said in a statement after the hearing. “Winding down and closing the estate continues in earnest, and we will continue efforts to appropriately distribute available assets from the general estate.”
Giddens is represented by Hughes Hubbard & Reed LLP.
Barclays is represented by Jonathan Schiller, Hamish Hume, Todd Thomas, Tricia Bloomer and Jonathan Shaw of Boies, Schiller & Flexner LLP.
The case is In re: Lehman Brothers Inc., case number 1:08-ap-01420, in the U.S. Bankruptcy Court for the Southern District of New York.For full story:
http://www.law360.com/articles/673572/-1-3b-lehman-barclays-settlement-gets-judicial-nod
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Lehman 'Repo' Clients Are Not Customers - U.S. Appeals Court
Jun 29, 2015 | Reuters
By Jonathan Stempel
A U.S. appeals court said banks that enter repurchase agreements with brokerages do not qualify as "customers" entitled to special legal protections when those brokerages fail, in a case arising from Lehman Brothers Holdings Inc's 2008 bankruptcy.
Monday's decision by the 2nd U.S. Circuit Court of Appeals may free James Giddens, the trustee liquidating Lehman's brokerage unit, to distribute more money to its unsecured creditors.
It also highlights a risk of repurchase agreements, or repos, which are widely used in Corporate America. A repo is where one company sells securities to another, often to fund its business, and agrees to buy them back later at a set price.
The case brought by Britain's CarVal UK Ltd arose from six repos from 2000 and 2001 in which Puerto Rico's Doral Financial Corp sold Lehman several hundred million dollars of securities.
Lehman still held those securities when it went bankrupt on Sept. 15, 2008. The securities had risen in value, and Doral sought to repurchase them at the set price and keep the profit. Giddens refused, and Doral then assigned its claims to CarVal.
Writing for the appeals court, Chief Judge Robert Katzmann said repo clients such as Doral were not protected as customers under the federal Securities Investor Protection Act because they did not "entrust assets" to brokerages.
SIPA covers losses up to $500,000 for customers of failed brokerages, and gives them priority over other creditors.
"Lehman's unrestricted ownership of the securities defeats any suggestion that Doral entrusted the securities to Lehman when it entered into the repos," Katzmann said. "Because Doral did not entrust securities to Lehman, we further conclude that the appellant is not a customer for purposes of SIPA."
Katzmann also rejected CarVal's argument that the 2010 Dodd-Frank reforms turned repo clients into customers, saying the law was silent and not retroactive on that issue.
Monday's decision upheld rulings by U.S. District Judge Denise Cote and U.S. Bankruptcy Judge James Peck of Manhattan.
Giddens called the decision "a significant milestone" in winding down the Lehman brokerage estate, and shows that repos are "akin to commercial borrowings, not customer transactions."
Luc Despins, a lawyer for CarVal, did not immediately respond to requests for comment.
Giddens has paid more than $106 billion to fully compensate roughly 111,000 former Lehman brokerage customers. Senior creditors have been paid in full. Unsecured creditors have recouped more than one-fourth of what they are owed.
The case is CarVal UK Ltd v. Giddens, 2nd U.S. Circuit Court of Appeals, No. 14-890. (Reporting by Jonathan Stempel in New York)
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Appellate Court Sides With Lehman in Repo Fight With Bank
Jun 29, 2015 | Dow Jones - Daily Bankruptcy Review
By Patrick Fitzgerald
A federal appellate court Monday said certain repurchase agreements don't qualify for "customer status" in a failed brokerage business, a win for the trustee winding down Lehman Brothers Inc . in his long-running fight with one of the broker-dealer's banks.
A three-judge panel of the U.S. Second Circuit Court of Appeals affirmed two lower-court rulings that a bank that sold securities to Lehman under a repurchase, or repo, agreement was a creditor---not a customer---of the company under the law....
For full story:
http://bankruptcynews.dowjones.com/Article?an=DJFDBR0120150629eb6tmw3me&cid=32135012&ctype=ts&pid=310&ReturnUrl=http%3a%2f%2fbankruptcynews.dowjones.com%2fArticle%3fan%3dDJFDBR0120150629eb6tmw3me%26cid%3d32135012%26ctype%3dts%26pid%3d310
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Lehman Claimant Lacks SIPA Customer Status, 2nd Circ. Says
Jun 29, 2015 | Law360
By Ben Conarck
The Second Circuit on Monday found that British investment manager CarVal UK Ltd. does not have customer status under the Securities Investor Protection Act to pursue $44 million in repurchase transaction claims from Lehman Brothers Inc., saying that the agreements did not create a fiduciary relationship.
CarVal — arguing for Doral Bank, which had initially asserted the claims in 2009 during the Lehman bankruptcy — contended that it had satisfied the entrustment requirement to be recognized as a customer under SIPA because Doral delivered assets to Lehman when it sold securities during the first part of the so-called “repo” agreements.
But the three-judge panel ruled that “mere delivery is not entrustment” and emphasized that entrustment must involve a fiduciary relationship between a broker and his customer, which arises out of the broker’s obligation to handle the customer’s assets for the customer’s benefit.
“Because Lehman was acting for its own interests, it had no obligation to use the securities on Doral’s behalf, and its relationship with Doral thus bore none of ‘the indica of the fiduciary relationship between a broker and his public customer,’” the panel said. “And without these indica of a fiduciary relationship, we cannot say that Doral entrusted securities to Lehman.”...Activities such as selling of assets for the customer, using the assets as collateral to make margin purchases of other securities for the customer or otherwise using the assets to facilitate securities trading by the customer are offered up by Baroff as examples of a broker holding assets as a fiduciary relationship and illustrate what is meant by entrustment, the panel said.
“Under this framework, Doral did not entrust anything to Lehman,” the opinion said. “Instead, it sold the securities to Lehman, which acquired full legal title.”
Lehman trustee James Giddens told Law360 in a statement on Monday that the ruling is a “significant milestone in winding-down and closing the Lehman Brothers Inc. estate, and it affirms long-standing policy and practice that repurchase agreements are akin to commercial borrowings, not customer transactions.”
Counsel for CarVal did not immediately return a request for comment on Monday.
Circuit Judges Robert A. Katzmann, Denny Chin and John M. Walker Jr. sat on the panel.
Arguing for the CarVal was Luc A. Despins of Paul Hastings LLP.
Arguing for SIPA Trustee Giddens was Michael E. Salzman of Hughes Hubbard & Reed LLP.
Arguing for SIPC was its senior counsel Kenneth J. Caputo.
The appeal is In re: Lehman Brothers, CarVal UK Limited v. Giddens, case number 14-890, in the U.S. Court of Appeals for the Second Circuit.For full story:
http://www.law360.com/articles/673542/lehman-claimant-lacks-sipa-customer-status-2nd-circ-says
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How Greece Could Go Down Like Lehman Brothers
Jun 29, 2015 | Fortune
By S. Kumar
...Today’s situation brings to mind an argument that some economists have posed over the past few years: Greece’s financial disaster could be as bad, if not worse, than Lehman Brothers, the storied investment bank that collapsed in 2008 and sparked a market panic that quickly spread through the entire U.S. financial system. In that case, the government was unwilling to bail out Lehman because it had just saved Bear Stearns and was wary of setting a bad precedent. But it failed to foresee the chain of dominos that the bank was a part of and would inevitably bring down.
The lesson there was that it wasn’t just the exposure that other market players had to Lehman, but the erosion of confidence in the financial system that led to a full-blown crisis. Banks, after witnessing the abandonment of Lehman, felt they could not rely on the help of the U.S. government to weather their brewing subprime mortgage storms. As a result, they stopped lending to each other and to other businesses, which led to an instant credit freeze and a dangerous increase in borrowing rates.
The aftermath, as the world remembers, was very bad. It necessitated an unprecedented bailout of nearly every large financial institution, including Bank of America BAC -3.04% , Citigroup C -2.59% , Goldman Sachs GS -2.59% , and Morgan Stanley MS -3.01% , as well as insurance giant AIG AIG -1.82% and automaker General Motors GM -3.35% . It can be argued that had the government saved Lehman, thereby preventing market panic and giving other banks time to unwind their exposure to toxic subprime mortgages, the fallout might have been somewhat contained and a softer economic landing achieved.
In addition, a bailout, as The New York Times points out, could have been easily structured to protect taxpayers, as the U.S. government’s rescue of AIG illustrates. At the time, though, Washington was more worried about excusing bad behavior than following the prudent plan of action. In the end, Congress and the White House would have no choice but to do what they didn’t want to. Greece’s detractors should learn from this experience. The real threat from a Greek economic collapse is not just the default on its debt or its exit from the euro, but a larger panic that could ripple across broader European markets, according to The LA Times.
That, in turn, could encourage investors to flee their positions regardless of merit; creditors demanding their money overnight, borrowing costs skyrocketing, and ordinary depositors withdrawing their cash in hordes – bleeding banks dry and sending already weak nations, such as Italy, Spain, and Portugal, into a death spiral. And neither would this disease remain contained to a few pockets since a crisis of confidence in the euro would impact the entire EU business establishment. A broad market sell-off and widespread bank runs are not out of the question.
During the Lehman crisis, government regulators fretted about condoning Too-Big-to-Fail, and rightfully so. But in the process they only created many more instances of Too-Big-to-Fail. Greece is small compared with many other more developed European economies, but the potential impact of its collapse on the rest of the region is not. As such, it is exactly like Lehman, and the EU and IMF should realize that before allowing it to collapse.
Client Attorney Privileged/Attorney Work Product/At Request of Counsel
Barclays PLC
Repo Agreement
CarVal UK Ltd.
Comment - Greece
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