Lehman, Barclays battle over 2008 sale goes before appeals panel

Wed May 29, 2013 5:19pm EDT
Email This Article |
Share This Article
  • Facebook
  • LinkedIn
  • Twitter
| Print This Article | Single Page
[-] Text [+]

By Nick Brown

NEW YORK (Reuters) - Lehman Brothers' defunct brokerage told an appeals court on Wednesday it was entitled to billions of dollars in cash it says was wrongly included in its 2008 sale to Barclays Plc (BARC.L: Quote).

The arguments in federal appeals court in New York renewed a murky, years-old court battle with huge implications for the brokerage's creditors, including Lehman affiliates and hedge funds.

"It was made very clear" in the asset purchase agreement "what was going to Barclays and what was staying behind," said the brokerage's lawyer, William Maguire. "The deal didn't exclude just some cash, it excluded all cash."

The dispute has its roots in the hectic sale of the brokerage's assets to Barclays in the days following the $639 billion bankruptcy of parent company Lehman Brothers Holdings Inc in September of 2008.

The brokerage contends the $250 million deal did not include the brokerage's cash assets. But Barclays says otherwise, relying on a so-called clarification letter signed after the deal was approved.

The disputed assets include margin to support exchange-traded derivatives, which could top $5 billion. They also include roughly $2 billion in so-called "clearance box" assets, which facilitate the clearance of securities trading. And they include $769 million promised to Barclays if Lehman's customers were paid in full.

U.S. Bankruptcy Judge James Peck approved the deal in 2008. Days later, the sides signed a "clarification" letter on the cash assets.

In 2011, Peck ruled that the clearance box assets should go to Barclays and the margin assets should stay with the brokerage. Then in June 2012, Judge Katherine Forrest in federal court in New York partially reversed Peck's ruling, assigning both the margin and the clearance assets to Barclays.   Continued...

The logo of Barclays bank is seen at its office in the Canary Wharf business district of London April 1, 2013. REUTERS/Chris Helgren