By Stephanie Gleason
The bankruptcy trustee winding down Lehman Brothers' brokerage
business on Monday said he would ask the U.S. Supreme Court to
review a ruling that awarded billions of dollars in disputed assets
to Barclays PLC.
Following Lehman's 2008 bankruptcy filing, Barclays acquired
Lehman's brokerage business in a "no cash" transaction, Lehman
says.
A year later, a legal fight over the transaction ensued when
Lehman sued Barclays, saying the British bank negotiated a secret
discount in the transaction. Judge James Peck, then Lehman's
bankruptcy judge, concluded that Barclays didn't receive an
improper "windfall" from the sale but wasn't entitled to the
so-called margin cash assets worth $4 billion.
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 trustee James W. Giddens on Monday said that "while the
Bankruptcy Court rightly rejected Barclays' claims to the margin
cash assets, the decisions by the District and Appeals Courts
reduced the amount available for the general estate by $4 billion,
frustrated the purpose of the liquidation, and undermined the
credibility of a sale hearing."
Barclays on Monday declined to comment on Lehman's decision to
appeal.
Lehman brokerage customers received about $92.3 billion almost
immediately after Lehman collapsed, and since then total
distributions have exceeded $110 billion, representing a 100%
recovery for customers and priority creditors. However, unsecured
creditors are receiving much less--$2.6 billion, or 17% of their
claims.
A victory in this appeal would increase those recoveries.
The appeals court ruling in August caused prices of unsecured
claims against Lehman to fall to a low of 40 cents, from about 46
cents, in some of the first losses traders had seen on Lehman
claims, The Wall Street Journal previously reported.
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.
The filing sent markets into turmoil and helped trigger a global
financial crisis. Lehman's brokerage business was quickly sold to
Barclays, and the company's New York-based holding company
officially exited bankruptcy in 2012.
The Lehman estate, Lehman Brothers Holdings Inc., is still
winding down and selling off its remaining holdings--a process that
is expected to continue for several more years. The brokerage is
technically not in bankruptcy but is being unwound separately under
the provisions of the Securities Investor Protection Act.
Joseph Checkler and Patrick Fitzgerald contributed to this
article.
Write to Stephanie Gleason at stephanie.gleason@wsj.com
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