Lehman liquidators challenge bank claims
By Francesco Guerrera, Justin Baer and Nicole Bullock in New York
Published: February 12 2010 22:14 | Last updated: February 12 2010 22:14
Lehman Brothers’ US liquidators are to press banks seeking more than $50bn from the failed Wall Street lender to cut their claims sharply or face being “named and shamed” in court. The move comes amid an escalating dispute over the value of derivatives trades.
Bryan Marsal, the chief executive of Lehman Brothers Holdings, who is charged with winding down the company and paying back creditors, told the Financial Times he would challenge claims by more than 40 banks that traded derivatives with Lehman.
EDITOR’S CHOICE
In depth: Lehman: the aftershock - Jan-29Long View: Learn from the past - Feb-05Lehman ruling creates new doubts for CDOs - Feb-08Lehman SPV ruling sparks controversy - Jan-26In depth: US banks - Feb-05“We have ranked all the banks according to their claims from the worst actors to the best actors,” said Mr Marsal, the head of the restructuring firm Alvarez & Marsal.
“Starting in March, we will begin to challenge their claims with our supporting data. If we do not settle, they will have to go to court and prove their claims.”
A court appearance could be potentially embarrassing and time-consuming for the banks and could force them to lift the lid on their secretive derivatives businesses.
Other creditors of Lehman have complained that, despite the banks’ claims, none of them admitted having material exposure to Lehman or took any losses related to the derivatives trades. Bank executives said that after taking hedges into account, their exposure was insignificant.
The banks, which include Wall Street institutions such as Goldman Sachs and Merrill Lynch and overseas rivals Deutsche Bank and Credit Suisse, argue that Lehman’s failure in September 2008 forced them to replace thousands of derivatives trades at the cost of billions of dollars.
Mr Marsal, who has branded some of the claims “outrageously unreasonable”, argues that the banks exploited a loophole in derivatives regulations that allowed them to make claims for the theoretical, rather than actual, cost of replacing the trades.
Lehman Brothers Holdings’ figures show that, the day before Lehman filed for bankruptcy, the company was actually owed money from its derivatives counter-parties. However, following the bankruptcy, the banks filed claims for a total of $51bn.
“The claims figures just don’t add up, and some of the most aggressive claims are clearly unsupportable,” Mr Marsal said.
The large banks involved in the Lehman claim declined to comment or could not be reached, but bank executives said the claims were valid and they would defend them.
News 
Market Data 
Discover 
