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Lehman settles $1.2 bln suit with Credit Suisse

The remnant of Lehman Brothers Holdings Inc. has settled a $1.2 billion derivatives lawsuit with Credit Suisse Group AG, wrapping up one of the most last final big legal battles involving the failed investment bank just about a decade after its cave in.

Creditors will get well about $280 million on Credit Suisse's derivatives claims towards Lehman, consistent with a Wall Street Journal analysis of bankruptcy court filings. But most of that cash is earmarked for other buyers, basically hedge funds, since the Swiss bank does not own many of the claims.

Credit Suisse had claimed $1.2 billion in losses related to early termination of thousands of derivatives contracts when Lehman filed for bankruptcy in 2008. Under the phrases of a agreement filed Tuesday night time in U.S. Bankruptcy Court in New York, collectors will get an allowed $385 million claim towards some Lehman subsidiaries and some other $363 million claim towards Lehman's primary holding company.

That is vital because Lehman treats in a similar fashion situated collectors of its subsidiaries another way than those of the guardian. For instance, common unsecured collectors of Lehman's special finance unit, the center of the failed investment bank's derivatives business, have to this point recovered greater than 39 cents on the dollar, though they are limited to how a lot they may be able to claim. Unsecured collectors of Lehman's commodities business have recovered greater than 80 cents on the dollar, while unsecured collectors of the bank's Lehman Commercial Corp. subsidiary have been paid in complete.

In comparison, unsecured collectors of the guardian were to start with slated to get well 21 cents on the dollar when Lehman's liquidation plan went into effect in 2012. However, they have since recovered just about two times that quantity as Lehman's wind down of its business has introduced in extra money than anticipated.

Credit Suisse says it expects a "non-material" loss of about $70 million to its strategic resolutions unit, a division the bank intends to near through the end of the year.

Representatives for Credit Suisse and Lehman declined to comment further on the agreement.

The crew winding down Lehman sued Credit Suisse, one of the most global's largest derivatives sellers, in 2013, claiming the bank artificially inflated its losses through greater than $1 billion to profit from Lehman's bankruptcy on the expense of alternative collectors. An ordeal in the derivatives dispute were slated for October.

Lehman's lawyers said in court papers that the agreement, which slashes $789 million off Credit Suisse's claims towards Lehman's holding company, is an affordable consequence given the uncertainty of litigation and the potential for protracted appeals.

Lehman, as soon as the nation's fourth-largest investment bank, collapsed into the biggest bankruptcy ever in September 2008 and its U.S. brokerage business used to be briefly bought off to Barclays PLC.

At the time of its cave in, Lehman used to be a party to or had assured greater than 10,000 spinoff contracts representing greater than 1.7 million transactions, consistent with court paperwork. Lehman additionally settled with JPMorgan Chase & Co. and Citigroup Inc. over billions of greenbacks in allegedly "phantom losses" designed to make sure they recovered 100% of their derivatives claims.

Lehman's postbankruptcy administrators have paid out kind of $125 billion to collectors since 2008.

A crew of bankruptcy pros beneath the path of turnaround company Alvarez & Marsal managed the New York holding company's assets until Lehman's official go out from bankruptcy in 2012, when a reorganized company emerged, overseen through a new board. The case is predicted to proceed for a number of extra years as the crew liquidates the estate's assets.

U.S. Bankruptcy Judge Shelley C. Chapman will consider approval of the agreement at a listening to scheduled for June 27.

Write to Patrick Fitzgerald at [email protected]

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