Lehman Preferred Series "J" Preferred (fka LEHJQ)

[coach tequila]

SWEET...EVEN THOUGH METAVANTE IS GOING TO APPEAL LEHMAN IS ON ITS WAY! THANKS JUDGE PECK!

Reuters
Metavante to appeal swap ruling in Lehman case
Fri Oct 23, 2009 2:24pm EDT
Email | Print | Share| Reprints | Single Page[-] Text [+] NEW YORK, Oct 23 (Reuters) - Metavante Technologies will appeal a decision by a New York court in a widely watched dispute with Lehman Brothers (LEHMQ.PK), in which the company lost a motion regarding payments it is required to make to the bankrupt company in a derivatives contract.
The provider of banking and payment technology on Friday lost a motion to amend or stay a decision made last month that found the company must continue to make payments on an interest rate swap, after it chose not to terminate the swap in the year following Lehman's failure.

Interest rate swaps are private agreements to swap fixed- and floating-rate payments based on interest rates.

An attorney for Metavante said before the ruling that he will appeal the decision if the judge ruled against the firm.

The case is being widely watched as it addresses safe harbors that contracts in the $450 trillion, privately traded derivatives markets have in bankruptcy. These include the right to cease making payments, to net and terminate contracts and to collect collateral backing the trades.

A lawyer for the official committee of unsecured creditors of Lehman expressed concerns on Friday that a victory by Metavante could encourage other counterparties to derivatives contracts to cease making payments to the firm.

This would impede efforts to recover assets to repay Lehman's creditors, as the derivatives portfolio is considered one of the bank's largest assets, he argued.

Derivatives are contracts that take their value from an underlying asset, such as debt, equity or commodities, or are tied to changes in interest rates.

PLAYING THE MARKET

Judge James Peck of the U.S. Bankruptcy Court for the Southern District of New York ordered last month that Metavante continue making payments on the swap, because it had failed to exercise its option to terminate the trade for a year after Lehman failed.

Peck reiterated the comments in his decision on Friday, adding that "Metavante self-consciously chose to play the market."

Lawyers for Metavante have argued that as the non-defaulting party they had the option to wait until the value of the contracts was more favorable to them to terminate the trade.

The company on Friday sought to amend the September decision so that payments it was ordered to make to Lehman on the swap be held in an escrow account. This would ensure funds are available for retrieval if the value of the contract swings so that Lehman owes payments to Metavante, they said.

Judge Peck denied the request, arguing that Lehman is highly liquid, and "sitting on a huge pile of cash" with assets of more than $15 billion. This would make it easier for Metavante to claim payments from Lehman in the event the contract moves in the company's favor, he said.

Metavante was acquired by electronic payment processor Fidelity National Information Services (FIS.N) earlier this month. (Reporting by Karen Brettell; Editing by Andrea Ricci)

http://www.reuters.com/article/bankruptcyNews/idUSN2311601120091023

Coach T