By Tom Corrigan
On Monday in Manhattan, U.S. Bankruptcy Court Judge Shelley
Chapman will be asked to approve a $1.28 billion settlement between
Lehman Brothers Inc. and Barclays PLC, which bought Lehman's
brokerage business days after the investment bank's 2008
collapse.
If approved, the settlement will end one of the long-running
legal battles arising from the financial crisis.
The money, related to the assets that went to Barclays when it
bought Lehman's U.S. brokerage out of bankruptcy in the frantic
days of September 2008, was a key issue in a 34-day trial in 2010.
The Lehman brokerage and its parent company accused Barclays of
negotiating a secret discount when it bought Lehman's
brokerage.
As part of the deal, the two sides will drop current and future
litigation against one another, and Lehman will pay Barclays $1.28
billion. More than $600 million in cash will become available for
Lehman creditors, because Lehman had set aside about $1.87 billion
for the dispute. Both Lehman and Barclays said the payment is about
$80 million less than what the trustee winding down Lehman's
brokerage business would have had to pay without a settlement.
On Wednesday in Wilmington, Del., Altegrity Inc., the parent of
a government security investigations contracting business, will ask
a judge to approve its bankruptcy-exit plan.
Altegrity and its affiliates filed for chapter 11 bankruptcy
protection in February, having lost the federal government
contracts that accounted for about one-third of its revenues.
Altegrity, along with two associated private security and
screening businesses, Kroll and HireRight, is slated to emerge from
bankruptcy with fresh cash from backers. All are owned by
Providence Equity Partners, but creditors will be taking equity
once the chapter 11 plans are in place.
US Investigations Services, a division of Altegrity Inc. that
also filed for bankruptcy in February, is being liquidated.
USIS vetted Edward Snowden for his National Security Agency
contract work, and it conducted the background check on Aaron
Alexis, who was working for a government subcontractor when he
killed 12 people in a shooting rampage at the Washington Navy Yard
in September 2013. Last summer, USIS was hit with a cyberattack
that exposed the personnel files of Department of Homeland Security
employees to hackers.
While USIS's unsecured creditors are hoping for lawsuit
recoveries, unsecured creditors of Altegrity, Kroll and HireRight
would be allotted $1.25 million to split under the plan. First-lien
debt would be reinstated under the plan, while holders of about
$519 million worth of second-lien debt will get 96.1% of the equity
in the reorganized Altegrity, for a recovery estimated to be about
48% of what they are owed. Remaining equity in the reorganized
company would be divided among other bondholders, chapter 11 plan
papers say.
In Manhattan Thursday, auto-parts maker Chassix Holdings Inc.
will ask a bankruptcy judge to sign off on a newly announced
restructuring plan that has support from the majority of its
creditors.
As part of the new plan, Chassix says it has satisfied the
objection of its official committee of unsecured creditors, who had
said a prior plan undervalued the company by $150 million.
The plan has support of private-equity firm Platinum Equity
Advisors, which owns Chassix, as well as holders of 73% of the
company's secured bonds and 80% of its unsecured bonds, Chassix
said. Chassix's overall strategy in bankruptcy is for the holders
of more than $500 million in debt to convert those claims into
equity in the restructured company. Unsecured creditors were slated
to recover between 5% and 16% of what they are owed, which is why
they were balking at the original proposal.
The creditors had said the prior plan would improperly release
Platinum as well as Chassix's directors and officers from all
potential litigation, including fraud, gross negligence and willful
misconduct. Creditors in bankruptcy cases typically want the right
to go after potential future claims, especially if they are only
getting pennies on the dollar. It is unclear whether some of these
provisions have been removed.
Chassix, a parts supplier to large auto makers, filed for
chapter 11 in March with a restructuring agreement that had the
support of the majority of its bondholders.
--Joseph Checkler and Peg Brickley contributed to this article.
Write to Tom Corrigan at tom.corrigan@wsj.com
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