June 15, 2011 / 12:12 AM / in 8 years

Lehman pushes back $1.5 billion SunCal tussle

NEW YORK (Reuters) - Lehman Brothers Holdings Inc LEHMQ.PK is delaying its fight to block real estate developer SunCal from challenging $1.5 billion in claims Lehman asserted as a creditor in bankruptcy court against a number of Lehman/SunCal real estate projects.

In court papers filed Tuesday, Lehman said it would delay until July 20 the matter initially scheduled for a hearing Wednesday in U.S. Bankruptcy Court in Manhattan.

A spokeswoman for Lehman declined to comment on the reason for the delay, but it comes a day after the California judge overseeing the bankrupt projects ruled against Lehman on a similar dispute in that court.

Lehman, which invested more than $2 billion in the 20 SunCal projects now in bankruptcy, is the major creditor in the California cases and has asserted about $1.5 billion in claims against it. SunCal has sought to disallow the claims, saying it should be entitled to recoup for losses because Lehman played a key role in causing its bankruptcy.

Lehman breached an agreement to make payments to vendors and bondholders in an attempt to gain control of the projects, SunCal has argued.

According to court filings, Lehman planned to argue before Judge James Peck, the New York judge handling its own bankruptcy, that SunCal’s attempt to “recoup” damages was actually a veiled attempt to recover money from Lehman. Such recovery is barred by bankruptcy’s automatic stay provision, which protects bankrupt firms against creditors looking to collect on debts, Lehman said.

But in a hearing on similar issues held Monday in U.S. Bankruptcy Court in Santa Ana, California, Judge Erithe A. Smith, ruled for SunCal, saying its objections to Lehman’s claims were defensive in nature and not barred by automatic stay.

Lehman took the matter off the New York agenda Tuesday afternoon, tentatively moving it to July 20. A lawyer for Lehman declined to comment on when, or if, the matter will actually be heard.

An attorney for SunCal did not respond to a request for comment.

Lehman filed the biggest bankruptcy in U.S. history in September 2008. The SunCal parties have proposed a plan to pull the Lehman/SunCal projects out of bankruptcy, but it would require subordinating Lehman’s claims below other creditors’, a move Lehman has steadfastly opposed.

The Lehman case is In re Lehman Brothers Holdings Inc, U.S. Bankruptcy Court, Southern District of New York, No. 08-13555.

The SunCal case is In re Palmdale Hills Property LLC and its related debtors, U.S. Bankruptcy Court, Central District of California, No. 08-17206.

(Editing by Gary Hill)

Corrects throughout to say SunCal is not in bankruptcy, certain SunCal/Lehman projects are bankrupt

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