Lehman Brothers Financial SA (LEHNQ)

[mellowbird]

Starting in February of 2015 Lehman Brothers Holdings Inc. started transferring claims to itself.

The article below may provide a clue. The 5 million dollar BRNP claim 29110 you found is one of several for MBS fraud. The judge ruled last July that these claims could not be subordinated, so I speculate that Lehman has since settled them, and these transfers back to itself are how those settlements get recorded. I am guessing that they would not appear as part of a normal distribution to creditors.

I don't see how paying off an unaffiliated party's claim amounts to retaining an asset as toogood wrote. It's just more money out the door.

mellowbird

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http://www.law360.com/articles/561869/lehman-can-t-subordinate-cmbs-fraud-claims-in-ch-11

Lehman Can't Subordinate CMBS Fraud Claims In Ch. 11
By David McAfee

Law360, Los Angeles (July 28, 2014, 8:21 PM ET) -- A New York bankruptcy judge on Monday ruled that Lehman Brothers Holdings Inc. cannot de-prioritize a number of securities fraud claims relating to certain collateralized mortgage-backed securities in its Chapter 11 bankruptcy, saying the MBS are not securities "of the debtor or of an affiliate of the debtor."
In an issue of first impression, U.S. District Judge Shelley C. Chapman overruled Lehman’s objection to the CMBS claims and denied its request for subordination pursuant to Section 510(b) of the Bankruptcy Code. Lehman had sought to subordinate the claims filed by holders of the debtors’ MBS, including those by the Federal Home Loan Bank of Pittsburgh.

The judge rejected Lehman’s argument that the FHLB MBS are securities "of the debtor" as the phrase is used in Section 510(b) and that they should be subordinated to the claims of Lehman’s unsecured creditors, saying Congress wasn’t thinking about MBS when it enacted the statute.

"[T]he court has endeavored here to retrofit a square peg, mortgage-backed securities, into a round hole, Section 510(b)," Judge Chapman wrote in the 15-page memorandum decision. "The court concludes that either under a plain reading of the statute or resorting to the stated purpose for enacting section 510(b) set forth in its legislative history, the MBS are not securities ‘of the debtor or of an affiliate of the debtor’ under Section 510(b) of the Bankruptcy Code."

Monday’s ruling is the most recent development in the bankruptcy proceedings and dispute over the claims, coming more than a year after Lehman requested subordination. The claims were filed by several holders of Lehman’s CMBS, including the Carlyle Group, the FHLB and BRNP Holdings LLC, according to court documents.

Between May 2006 and November 2007, the FHLB bought MBS associated with six non-debtor trusts, each reflecting an unpaid principal balance and a coupon rate, and each representing the right to a share of certain cash flows generated by the residential mortgage loans owned by each trust, court documents say.

The FHLB now seeks monetary damages from alleged misrepresentations and omissions in the registration statements and other related offering documents prepared and distributed by Lehman and its affiliated debtors in the Chapter 11 case.

Lehman argued that, because debtor Structured Asset Securities Corp. — as depositor of the MBS — is considered the "issuer" of the MBS, the MBS must be securities "of the debtors" and the claims must be subordinated.

But the FHLB said the MBS didn’t provide the company with an ownership interest in any of the debtors or a right to repayment by any of the debtors. The court sided with the FHLB on Monday.

"The court finds that, while the MBS are debt securities, they are not securities ‘of the debtor or of an affiliate of the debtor’ as such phrase is used in Section 510(b) of the Bankruptcy Code," the decision says. "The risk underlying the MBS obligations is tied not to the financial wherewithal of one of the debtors, but rather to the wherewithal of the borrowers on the loans in the pools of mortgages."

Representatives for the parties didn’t immediately return requests for comment on Monday.

Lehman is represented by Joseph Serino Jr., Shireen A. Barday and Quan Hong of Kirkland & Ellis LLP.

The Federal Home Loan Bank of Pittsburgh is represented by Thomas P. Berndt of Robins Kaplan Miller & Ciresi LLP.

The case is In re: Lehman Brothers Holdings Inc. et al., case number 1:08-bk-13555, in the United States Bankruptcy Court for the Southern District of New York.