Replies to post #1225 on Lehman Brothers Financial SA (LEHNQ)

[linda1]

This is an excellent Objection and it just proves what I have been saying that Class 5 is only subordinate to Class 3.


THE US BANK NATIONAL as TRUSTEE takes the position that the Junior Note holders should receive equal treatment with the General Unsecured Creditors even though they are contractually subordinate to Senior Notes.


And the TRUSTEE relies on and refers to the US BANKRUPTCY CODE.




"The Debtor’s decision to exclude subordinated note holders from a distribution is inappropriate.

While contractual subordination exists between the senior and junior note holders, no such

obligation exists between the Debtor and the junior note holders. The Debtor must treat its

general unsecured creditors and its junior note holders as equals. As such, distributions from the

Plan should be made to U.S. Bank, as the Junior Indenture Trustee, for the holders of the Junior

Convertible Notes. U.S. Bank will then comply with its contractual obligation to turnover the

funds, after exercising its charging lien, to the holders of the Subordinated Notes (as defined

below)."





7. The Junior Convertible Notes are not subordinate to general unsecured

creditors; rather, the Junior Convertible Notes are subordinate to “Senior Debt” which

specifically excludes non-recourse debt, debt between the Debtor and its subsidiaries, employee

obligations, taxes, trade debt and the Junior Convertible Notes themselves. See Junior

Convertible Notes Indenture at §1.1. A copy of the Junior Convertible Notes Indenture is

attached hereto as Exhibit A.





http://www.kccllc.net/documents/0911351/0911351091001000000000004.pdf