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Lehman Oct 15
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Lehman Seeks Billions In Allegedly Lost Swap Payments
Oct 14, 2015 | Law360
By Jacob Fischler
A Lehman Brothers unit sued hundreds of noteholders, issuers and trustees Tuesday, saying they cost the former investment giant “billions” when they failed to honor credit default swap agreements and wrongly reassigned payment priorities when Lehman filed for bankruptcy. -
Is Glencore The Next Lehman?
Oct 14, 2015 | Investing.com
... However, although Glencore’s problems will hit the creditors, it should not turn into the next Lehman Brothers crisis. Why? First, Lehman was more than 4 times bigger. Second, Lehman was much more leveraged with only 3 percent ...
Client Attorney Privileged/Attorney Work Product/At Request of Counsel
Credit Default Swap Agreements
Comment - Glencore
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Lehman Seeks Billions In Allegedly Lost Swap Payments
Oct 14, 2015 | Law360
By Jacob Fischler
A Lehman Brothers unit sued hundreds of noteholders, issuers and trustees Tuesday, saying they cost the former investment giant “billions” when they failed to honor credit default swap agreements and wrongly reassigned payment priorities when Lehman filed for bankruptcy.
The bankruptcy filings of Lehman Brothers Special Financing Inc. and Lehman Brothers Holdings Inc. in fall 2008 should have constituted an “event of default” that should have triggered a freeze on payment priority exchanges or other transfers under bankruptcy law, LBSF said Tuesday.
Instead, the trustees — which include Bank of America NA, Citibank NA, Wells Fargo Bank NA and others — relied on “unenforceable ipso facto clauses” in the swap agreements and began avoiding their obligation to make the agreements’ mandated termination payments to LBSF before paying interest and principal to noteholders, LBSF said.
“The trustees terminated the swap agreements and caused modifications of LBSF’s rights to priority payment, and the transfer of LBSF’s senior payment priority to the noteholders,” LBSF said. “Thereafter, the trustees liquidated and distributed (in whole or in part) to the defendant noteholders the issuers’ assets … that but for the enforcement of the priority modification provisions would have been due and owing to LBSF.”
In a similar 2010 case, a federal bankruptcy judge ruled such payment priority modification provisions are unenforceable, LBSF said. In the instant case, the noteholders won “an enormous (and unjustifiable) windfall,” while LBSF and its creditors were robbed of its rightful payments, LBSF said.
“The payment priority exchanges and collateral transfers, which were based on the application of unenforceable ipso facto clauses, were therefore designed to remove those assets from the reach of LBSF’s creditors and thereby hinder, delay or defraud LBSF’s creditors by depriving them of access to LBSF’s valuable property rights,” the defunct investment bank said.
In a 94-page, 25-count fourth amended complaint, LBSF sued for, among other items, turnover of the payments it says were wrongly made to the noteholders, avoidance of the priority and proceed transfers, unjust enrichment, money had and received and constructive trust against the noteholders, and breach of contract claims against the trustees.
An attorney for LBSF declined to comment Wednesday...For full story: http://www.law360.com/articles/714351/lehman-seeks-billions-in-allegedly-lost-swap-payments
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Oct 14, 2015 | Investing.com
Following the plunge in Glencore's (L:GLEN) share price, investors raised concerns that the mining giant may be the next Lehman Brothers. Is that true?
...Are these fears justified? Undoubtedly, the company is too indebted with net debt worth almost $30 billion and much larger gross debt due to off-balance sheet liabilities resulting from its massive trading arm. However, although Glencore’s problems will hit the creditors, it should not turn into the next Lehman Brothers crisis. Why? First, Lehman was more than 4 times bigger. Second, Lehman was much more leveraged with only 3 percent of assets financed by equity, while Glencore has one third of equity. And Lehman had a 15 times larger derivatives exposure (after netting). Third, Glencore has a more stable capital structure and generally funds short-term assets by short-term debt, while Lehman funded long-term assets with short-term debt more freely, so it suffered from a severe maturity mismatch. Fourth, Lehman was much more systematically important than Glencore, which is not a major dealer, so there is lower risk of contagion. And the financial system was more fragile before Lehman (actually, the crisis started in 2007), while today we have so far experienced a slowdown in economic growth rather than serious financial turmoil. Fifth, Glencore is not expected to be bailed out – this is an important difference, because the very Fed’s decision to not bail out Lehman set off the panic.
To sum up, Glencore suffers from serious economic problems due to low commodity prices, but it should not trigger the next Lehman Brothers crisis. The price of gold would not get a boost (not yet). This does not mean that financial system is healthy and stable, but investors should look for other candidates for the next Lehman (maybe Deutsche Bank (N:DB)?).
For full story: http://www.investing.com/analysis/is-glencore-the-next-lehman-268139
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Credit Default Swap Agreements
Comment - Glencore
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