BNY Mellon will appeal Lehman ruling on Dante CDO

NEW YORK (Reuters) - Bank of New York Mellon Corp (BK.N) said on Tuesday it will appeal a recent decision by a bankruptcy court regarding a dispute with Lehman Brothers LEHMQ.PK that could have a wide-ranging impact on complex derivatives products.

The U.S. Bankruptcy Court for the Southern District of New York ruled last week that investors in a collateralized debt obligation (CDO) called Dante did not have the right to jump ahead of Lehman to be repaid assets from the deal because the provision violates U.S. bankruptcy law.

The decision contrasts with a ruling made in the English High Court last year that decided that investors in the deal could be repaid ahead of the bank because its collapse in September 2008 constituted a default.

BNY Mellon, which is trustee to the CDO's assets, last year lost a motion in the New York bankruptcy court to dismiss the case.

"As a result of the conflicting court decisions in the U.S. and U.K. regarding the Lehman-sponsored Dante bond program, BNY Mellon, in its role as trustee, will appeal the recent ruling by U.S. Bankruptcy Court," BNY Mellon spokesperson Serra Balls said in a statement on Tuesday.

"The U.S. court's ruling is likely to have implications beyond this specific case and we are hopeful the appeal will help clarify the issue," Balls said.

The case is being watched closely as it is expected to establish a benchmark in setting up a priority of claims in bankruptcy cases involving CDOs that use derivatives. CDOs pool assets, such as corporate or other debt, and are divided into tranches of varying risk and returns.

The impact could be wide-ranging because of the prevalence of derivatives in CDOs. These may include credit default swaps, which are used to insure against a debt default, total return swaps, interest rate swaps or other derivatives.

Lawyers have estimated an additional $12 billion in claims could be made based on the outcome of the Dante case.

(Reporting by Karen Brettell; Editing by Gary Crosse))