Lehman Brothers Holdings Inc. is suing Intel Corp. (INTC) over
$1 billion the computer chip maker seized as the result of a sour
swap deal.
In a Wednesday filing with U.S. Bankruptcy Court in Manhattan,
Lehman said the more-than $1 billion in collateral Intel seized a
few weeks after the investment bank's 2008 collapse was too
much.
"This is an action to recover collateral that was unlawfully
seized by Intel in breach of a swap agreement between [Lehman's
over-the-counter derivatives unit] and Intel," Lehman said. Intel
didn't immediately respond to a request for comment.
When Lehman filed for bankruptcy on Sept. 15, 2008, Intel had
the right to terminate the swap agreement, which called for Intel
to pay Lehman $1 billion in exchange for a number of Intel shares
determined by a formula based on Intel's stock price fluctuation.
Instead, Intel waited out the market and decided to terminate the
agreement on Sept. 29, 2008, which also happened to be the
settlement date for the swap. Intel's responsibility at that point
was to determine its losses as a result of the termination and
seize cash from Lehman based on that determination. Intel decided
to seize the entire $1 billion in collateral and $2 million in
interest.
"Intel's reasonable losses as a result of terminating the swap
agreement were far less than $1 billion," Lehman said in its
filing. The investment bank added, "all Intel was entitled to was
50,552,943 shares of Intel stock as the value of the number of
shares."
In the filing, Lehman said it has demanded the money back but
Intel hasn't returned it.
Lehman said that if Intel bought those shares on the open market
around that time, after a company-imposed "blackout" period, the
stock would be worth less than $700 million.
In the filing, Lehman said it is suing Intel for breach of
contract, violation of the automatic-stay provision of the
Bankruptcy Code that protects debtors from litigation, and
violation of the turnover provision of the Code that allows
companies to recover property.
Lehman collapsed in September 2008, becoming a symbol of one of
the great financial crises in the country's history. Its U.S.
brokerage business was quickly sold to Barclays PLC (BCS), but the
remnants of the rest of Lehman still exist in billions of dollars
of assets being overseen by Alvarez & Marsal and the winding
down of the brokerage business under the guidance of trustee James
W. Giddens.
The company's payback plan became effective in early 2012, and
creditors have been paid $47 billion since. Still, the estate
continues to pursue claims for creditors like the one against
Intel, ensuring Lehman will have regular dates in bankruptcy court
for years to come.
(Dow Jones Daily Bankruptcy Review covers news about distressed
companies and those under bankruptcy protection. Go to
http://dbr.dowjones.com
Write to Joseph Checkler at joseph.checkler@dowjones.com. Follow
him on Twitter at @JoeCheckler.
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