Barclays balks at Lehman trial order over assets
By Nick Brown
Taking issue with a bankruptcy judge's February ruling, Barclays said it should be allowed to keep between $1 billion and $6 billion to offset liabilities it inherited by acquiring Lehman's proprietary cash accounts.
Barclays made its argument in court papers late Thursday outlining how the judge's order, which concluded a 34-day trial between Barclays and Lehman trustee James Giddens, should be interpreted.
In his order, U.S. Bankruptcy Judge James Peck in Manhattan had said Barclays owed the trustee about $4 billion in cash margin assets that should not have been transferred. Barclays said in its court papers that the $4 billion it owes should be reduced, citing offsets based on liabilities it inherited.
The bankruptcy court trial centered on the negotiations leading up to the Barclays sale in the week following Lehman's frantic Chapter 11 filing in September 2008. Lehman sought unsuccessfully to invalidate the sale, saying Barclays left vital information out of the court record to attain a sweetheart deal.
Lehman, still in Chapter 11, has said it hopes to present a court-approved restructuring plan to creditors for a vote later this year. Its proposed plan faces opposition from groups of creditors who have submitted competing proposals.
The Lehman trustee, in charge of liquidating what is left of the company's brokerage, said in court papers that Barclays' claim for additional margin assets is based on an agreement between the parties that was never approved by the court.
The trustee is seeking to largely uphold the language of Peck's initial order.
"We are disappointed with the introduction of unnecessary complexities at this stage of the process," Giddens said in a statement. "We are hopeful that the final orders will remain consistent with the court's previous ruling."
Barclays and its attorneys declined to comment Friday.
Barclays also asked the court to increase an award of $870 million in damages for Lehman's failure to deliver so-called clearance box assets, which facilitate the clearance of securities trading.
The award should reflect the appreciation in value of the assets, Barclays said.
A hearing on the dispute is set for May 9.
The case is In re Lehman Brothers Holdings Inc, U.S. Bankruptcy Court, Southern District of New York, No. 08-13555.
(Editing by Gerald E. McCormick)