Representatives of the Lehman Brothers’ estate have asked a judge to re-open the contract that transferred the bank’s North American assets to Barclays Capital a year ago, claiming that up to $8 billion in cash and securities was transferred to BarCap without the court’s knowledge, said the Financial Times. Attorneys for Alvarez & Marsal, the turnround firm hired by Lehman’s creditors to maximise the amount of recoverable assets, claimed that in the frenzied week during which Lehman’s US assets were sold to Barclays last year – for $1.75 billion – the bankruptcy court was unaware of the true value of assets being transferred. “To right the wrong that resulted, it is not necessary for the court to undo the sale,” the motion said. “Rather, the court needs only to require Barclays to return to the sellers’ estates the value it took in excess of what the sellers were entitled to convey based on the record before the court.” Lehman’s executors state that Barclays transferred $45 billion in cash to Lehman after the bankruptcy last year in return for $50 billion in securities, with the understanding that Lehman would be able to reverse the transaction at a future date. The motion claims that “certain Lehman and Barclays executives” decided to eliminate the reversal option, in effect locking in a $5 billion gain for Barclays. The motion claims that Barclays’ assertion last year that it would assume $2bn in bonus liabilities for legacy Lehman employees was inflated by $1 billion. Alvarez & Marsal also say that Barclays’ forecast that it would need $1.5 billion as a “cure” for payments necessary to keep Lehman’s operations running was overstated. Barclays said: “This is an opportunistic claim. Now that the economy has begun to stabilise, the Lehman Estate is trying to re-trade the deal on the basis of a meritless argument.”
Lehman Creditors Challenge Barclays Capital Transfer
Attorneys claimed that in the frenzied week during which Lehman’s US assets were sold to Barclays last year – for $1.75 billion – the bankruptcy court was unaware of the true value of assets being transferred.
September 16, 2009