BOA, Merrill pledge support for Lehman exit plan
By Nick Brown
NEW YORK (Reuters) - Lehman Brothers Holdings Inc LEHMQ.PK unveiled the latest in a string of settlements with major financial creditors, reaching deals with Bank of America Corp (BAC.N: Quote) and Merrill Lynch that will reduce the banks' claims against Lehman by a combined $7.5 billion.
As part of the settlement, the banks have pledged support for Lehman's $65 billion bankruptcy exit plan, according to court papers filed late on Wednesday in U.S. Bankruptcy Court in Manhattan.
Bank of America will reduce its derivatives claims against Lehman entities by $4.5 billion, Lehman said. Merrill Lynch, a Bank of America subsidiary since 2008, will lower its claims by an additional $3 billion, court papers show.
Bank of America will also withdraw an appeal of a bankruptcy court's ruling rejecting its $500 million setoff claim against Lehman, and will return about 71 percent of that total -- $356 million -- to the Lehman estate, according to the filing.
The deal still requires bankruptcy court approval, and is set for hearing on October 19.
A Lehman spokeswoman did not provide an immediate comment Wednesday night.
Bank of America lauded the "reasonable resolution," saying in a statement that there are "compelling reasons" the deal should be approved by the court.
The settlement is part of a larger effort by Lehman to resolve complex claims from big banks that were counterparties in various derivatives transactions totaling more than $20 billion. Continued...