Judge OKs Lehman settlement with Barclays, JPMorgan
By Emily Chasan
NEW YORK, Dec 22 (Reuters) - A U.S. bankruptcy judge approved a settlement calling for $1.27 billion in cash plus securities with a face value of $5.7 billion to be transferred to Barclays Plc (BARC.L) in connection with its purchase of the core U.S. brokerage business of Lehman Brothers Holdings Inc.
The settlement relates to fund transfers made the week of Sept. 15 to keep Lehman's (LEHMQ.PK) brokerage business operating while the parent company filed for Chapter 11 bankruptcy.
U.S. Bankruptcy Judge James Peck approved the settlement on Monday and said the Lehman creditors committee could conduct further inquiries into the agreement if it chose.
"This settlement represents a significant benefit to (Lehman Brothers) and is the right thing to do," Peck said, citing representations made by lawyers for JPMorgan Chase & Co (JPM.N), Barclays, Lehman and the Federal Reserve Bank of New York in court on Monday.
The securities being transferred, many of them mortgage-backed securities, have declined substantially from their original value, lawyers for the various parties said in court. They declined to give the current value of the securities.
According to court papers, the $7 billion in cash and securities stemmed from a sum Barclay's had expected to receive after loaning $45 billion to the Lehman brokerage business on Sept. 18, two days before the court approved its purchase of the unit.
The broker-dealer needed the funds to guarantee its short-term obligations. It had been given assistance earlier that week from the New York Fed, which made a short-term loan worth $46.22 billion to Lehman.
Barclays had expected $49.7 billion to be returned to it from Lehman as part of its loan, but only $42.7 billion could be transferred before the court ordered the liquidation of Lehman's brokerage business.
The securities and cash will come from Lehman Brothers Inc accounts at JPMorgan Chase & Co (JPM.N), according to court papers. JPMorgan has agreed to release liens it has on those accounts. Lehman Brothers Inc is the brokerage business that is being liquidated by a trustee to facilitate the transfer of customer accounts to Barclays and other parties.
Harvey Miller, a lawyer representing bankrupt Lehman Brothers Holdings, told the court that the brokerage's former parent company did not object to the settlement and that it would spare the company significant future litigation. (Reporting by Emily Chasan; editing by John Wallace)
