NEW YORK - (Mealey's) JPMorgan Chase Bank NA on Feb. 1
agreed to pay nearly $700 million to bankrupt Lehman Brothers Holdings Inc.
(LBHI) that JPMorgan had been previously paid for "purportedly secured claims
against LBHI on the basis that, as 'affiliates' of JPMorgan Chase Bank, N.A.,
their claims were guaranteed by LBHI" under a September 2011 guaranty and secured
by collateral posted by LBHI "in connection therewith," according to a motion
for approval of settlement filed in New York federal bankruptcy court (In re
Lehman Brothers Holdings Inc., et al., No. 08-13555, Chapter 11, S.D. N.Y.
Bkcy.; See January 2012, Page 12).
LBHI and the Official Committee of Unsecured Creditors of
LBHI moved for approval of settlement in the U.S. Bankruptcy Court for the
Southern District of New York.
Under the terms of the settlement, JPMorgan would pay
$699.2 million "that had been previously allocated to satisfy the claims."
Reasonable Solution
"The Movants believe that the Settlement Transaction
embodied in the Term Sheet is a reasonable solution of the Claim Objection
because the overall value to LBHI is approximately 98% of the amount in dispute
and will be immediately available for the first distribution to be made to
LBHI's creditors under the Chapter 11 Plan. Entering into the Settlement
Transaction will also result in significant benefits to the estate by avoiding
the costs, delay and litigation risks associated with having to prosecute the
issues raised in the Claim Objection," the movants say.
The movants contend that on Sept. 9, 2008, JPMorgan Bank
"allegedly required LBHI to issue a guaranty of all liabilities of any type of
LBHI and its subsidiaries to JPMorgan Bank and its affiliates, subsidiaries,
successors and assigns. In total, LBHI posted $8.6 billion of cash and
cash equivalents to secure the September Guaranty pursuant to a security
agreement."
"On or about September 22, 2009 the Funds filed over $710
million of purportedly secured claims against LBHI on the basis that, as
'affiliates' of JPMorgan Bank, their claims were guaranteed by LBHI under the
September Guaranty and secured by the collateral posted by LBHI in connection
therewith. The proofs of claim filed by the Funds included claims
for losses related to, among other things, bonds (including claims related to
contractually subordinated debt issued by LBHI), unsettled trades, cancelled
trades, derivatives unwinds, futures contracts, corporate actions and prime
brokerage exposure," the movants say.
Claim Objection
The movants filed a claim objection on Oct. 26, 2011,
seeking a ruling that the funds were not "affiliates" of JPMorgan Bank "and,
thus, were not entitled to rely upon the September Agreements as a basis for asserting
secured claims against LBHI."
LBHI and its debtors-in-possession are represented by
Joseph D. Pizzurro, L.P. Harrison III, Michael J. Moscato, Nancy E. Delaney,
Peter J. Behinke and Cindi Eilbott Giglio of Cutis, Mallet-Prevost, Colt &
Mosle in New York.
The unsecured creditors are represented by John B. Quinn,
Eric Taggart and Matthew Scheck of Quinn Emanuel Urquhart & Sullivan in Los Angeles and Susheel Kirpalani, Andrew J. Rossman and
James Tecce of Quinn Emanuel in New
York.
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