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Lehman Sept 10
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Lehman Trustee Begins Third Payout to Brokerage Creditors
Sep 9, 2015 | The Wall Street Journal
By Joseph Checkler
The trustee in charge of Lehman Brothers Inc. on Wednesday began distributing about $1.75 billion more to the defunct brokerage’s unsecured creditors, the third such distribution since he finished paying off the brokerage’s customers last year. -
FHLB Loses Bid To Trim $150M Lehman Swap Suit
Sep 9, 2015 | Law360
By Jonathan Randles
A bankruptcy judge on Wednesday denied Federal Home Loan Bank of New York's bid to trim a lawsuit alleging it cheated Lehman Brothers Holdings Inc. out of more than $150 million by undervaluing interest rate swaps that went bad after Lehman collapsed in 2008.
Client Attorney Privileged/Attorney Work Product/At Request of Counsel
Unsecured Creditor Distribution
Federal Home Loan Bank of New York
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Lehman Trustee Begins Third Payout to Brokerage Creditors
Sep 9, 2015 | The Wall Street Journal
By Joseph Checkler
The trustee in charge of Lehman Brothers Inc. on Wednesday began distributing about $1.75 billion more to the defunct brokerage’s unsecured creditors, the third such distribution since he finished paying off the brokerage’s customers last year.
The payments, approved by Lehman’s bankruptcy judge early last month, will bring the total amount returned to unsecured creditors to around $7.65 billion, a recovery of about 35 cents on the dollar. Combined with distributions made to customers, the total amount recovered in the brokerage’s liquidation will be around $114 billion.
“The third multibillion-dollar distribution to general creditors is under way as winding down the estate moves ahead,” said the trustee, James W. Giddens. “We will continue to resolve remaining claims to maximize potential future distributions and successfully conclude the largest broker-dealer liquidation in history.”
Judge Shelley C. Chapman of U.S. Bankruptcy Court in Manhattan commended Mr. Giddens for his efforts at the hearing last month, calling it an “incredibly extraordinary accomplishment.”
Mr. Giddens had said that after this third distribution is complete, further payouts would be contingent on winning or settling pending litigation, which would free up funds currently on reserve.Advertisement
The trustee began paying back creditors—former employees, pension funds, banks and investment firms with unsecured claims against the brokerage—last summer after making the brokerage’s customers whole.
The distinction between “customer” and “unsecured creditor” is a crucial one in the Lehman case. Customer claims get paid before creditor claims under the law covering failed broker-dealers, the Securities Investor Protection Act of 1970.
Customers got 100% of their money back, as have those holding secured and priority claims. Unsecured creditors get much less, albeit much more than most parties in the case originally expected.
As Mr. Giddens has resolved and settled more claims, he has asked Judge Chapman to approve distributions to the creditors.
Individual customers of the U.S. brokerage, which is under the purview of the bankruptcy court but not technically in bankruptcy protection, received about $92.3 billion almost immediately after Lehman collapsed. In all, Mr. Giddens will have exceeded his goal of returning $110 billion by nearly $4 billion when this distribution is finished.
Lehman, once the nation’s fourth-largest investment bank by assets under management, collapsed into the largest bankruptcy ever in September 2008 with $613 billion in liabilities...
For full story: http://www.wsj.com/articles/lehman-trustee-begins-third-payout-to-brokerage-creditors-1441805748
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FHLB Loses Bid To Trim $150M Lehman Swap Suit
Sep 9, 2015 | Law360
By Jonathan Randles
A bankruptcy judge on Wednesday denied Federal Home Loan Bank of New York's bid to trim a lawsuit alleging it cheated Lehman Brothers Holdings Inc. out of more than $150 million by undervaluing interest rate swaps that went bad after Lehman collapsed in 2008.
U.S. Bankruptcy Judge Shelley Chapman denied FHLB's motion to dismiss that sought to nix claims brought by Lehman for an alleged breached of the implied covenant of good faith and fair dealing and equitable subordination. Judge Chapman said at this early stage, Lehman has successfully pleaded those claims and went on to say that the lawsuit accuses FHLB of malfeasance over its decision to terminate the swaps that needs to be investigated.
“It's a troubling set of facts on its face,” Judge Chapman said during a hearing in Manhattan.
The lawsuit, filed in May by Lehman and Lehman Brothers Special Financing Inc., concerns FHLB's termination of some 356 swaps and derivative transactions on Sept. 18, 2008 — three days after Lehman rocked financial markets by filing for Chapter 11.
Lehman's complaint seeks $150 million from FHLB, plus interest. Attorneys for FHLB and Lehman indicated during Wednesday's hearing that the amount in dispute with interest included could be $200 million or as high as $300 million.
Lehman's attorneys say FHLB was required under the terms of a contractual agreement and the U.S. bankruptcy code to assess the value of the swaps at the time they were terminated. The timing is crucial to Lehman because at the time the swaps were terminated, Lehman was “in the money,” meaning FHLB owed it a “substantial termination payment.”
Instead, with the markets in turmoil, FHLB chose to value the swaps over a period of time which allowed the bank to “massively understate” the value of the transactions, according to the complaint. The lawsuit says FHLB's decision was part of a ploy to “play the market” at Lehman's expense.
During the course of the bankruptcy, FHLB has filed claims seeking tens of millions of dollars related to the swaps. Lehman says those claims should be expunged because FHLB is the party actually on the hook for termination payments.
In FHLB's motion to dismiss, the banks argued that the claims should be dismissed because it “eliminated any potential harm to creditors arising from the alleged inequitable conduct by reducing its bankruptcy claim, mooting any grounds for equitable subordination.” The bank has said in a March U.S. Securities and Exchange Commission filing that it believes Lehman's claims are without merit.
Lehman and LBSF are represented by Ralph I. Miller and Jacqueline Marcus of Weil Gotshal & Manges LLP.
FHLBNY is represented by Mitchell Berns,Yann Geron, Oksana Wright and Kathleen Aiello of Fox Rothschild LLP...For full story: http://www.law360.com/articles/700786/fhlb-loses-bid-to-trim-150m-lehman-swap-suit
Client Attorney Privileged/Attorney Work Product/At Request of Counsel
Unsecured Creditor Distribution
Federal Home Loan Bank of New York
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