Lehman Sues Japanese Investment Bank Over Derivatives
29 Dicembre 2015 - 3:40PM
Dow Jones News
Lehman Brothers Holdings Inc. is suing Daiwa Securities Capital
Markets Co. over hundreds of soured swaps and options, claiming the
Japanese investment bank shortchanged it on hundreds of derivatives
contracts after Lehman's bankruptcy to reap a multimillion-dollar
windfall.
In a lawsuit filed with U.S. Bankruptcy Court in New York,
lawyers for Lehman say the bank was "in the money" to the tune of
$75 million on 955 derivatives transactions—mainly interest rate
and credit default swaps—with Daiwa at the time of Lehman's 2008
bankruptcy filing.
Daiwa used "commercially unreasonable and bad-faith valuation
techniques, including deducting tens of millions of dollars of
'unwind costs' that it did not incur" from its valuations of the
derivatives transactions, Lehman's lawyers claim in the suit, filed
last week.
"By manufacturing fictitious charges, Daiwa sought to turn a
multimillion-dollar payable it owed [Lehman] into a
multimillion-dollar receivable that it was not entitled to receive,
" Lehman said.
A Daiwa lawyer declined to comment.
Lehman is asking U.S. Bankruptcy Judge Shelley C. Chapman for
the $75 million it says it was owed at the time the swaps were
terminated, plus interest. It is also asking the judge to toss
Daiwa's $46 million claims against Lehman.
Although Lehman officially exited bankruptcy protection in 2012,
its derivatives team is still wrangling with creditors over
billions of dollars in disputed claims. Swaps and other derivatives
represent a significant source of cash for Lehman creditors waiting
to be paid more than six years after the investment bank filed for
bankruptcy protection.
Derivatives counterparties have argued that Lehman's bankruptcy
constituted a default under their swaps agreements.
In a key ruling in 2010, Judge James Peck, the judge then
overseeing Lehman's chapter 11 case, said those clauses were
so-called ipso facto provisions that deprived Lehman of the benefit
of its in-the-money position under the swaps. Provisions
terminating a contract solely because of a bankruptcy filing are
known as ipso facto clauses and are generally prohibited under U.S.
bankruptcy law.
Lehman, once the world's fourth-largest investment bank, was a
party to or had guaranteed more than 10,000 derivative contracts
representing more than 1.7 million transactions at the time of its
collapse, according to court documents. The team working on
unwinding the deals has so far recovered billions in cash for the
benefit of creditors.
Bankruptcy professionals under the direction of Alvarez &
Marsal Inc. managed the New York holding company's assets until
Lehman's exit from chapter 11 more than three years ago, when a
reorganized company, overseen by a new board of directors, emerged.
Lehman Holdings and its subsidiaries have already returned about
$100 billion to creditors.
Write to Patrick Fitzgerald at patrick.fitzgerald@wsj.com
(END) Dow Jones Newswires
December 29, 2015 09:25 ET (14:25 GMT)
Copyright (c) 2015 Dow Jones & Company, Inc.
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