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Judge snubs Lehman on Barclays sale
By Jonathan Stempel |
February 24, 2011, Thursday
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Print Edition
Print Edition
LEHMAN Brothers Holdings Inc's hurried sale of much of its United States operations to Barclays Plc at the height of the financial crisis was fair, and its bankruptcy estate is not entitled to recover an US$11 billion "windfall," a federal judge ruled.
The long-awaited ruling by US Bankruptcy Judge James Peck followed a trial in which Lehman argued that Barclays got a sweetheart deal in acquiring its US investment banking and brokerage operations.
Lehman agreed to sell that business for about US$1.85 billion on September 20, 2008, just five days after the company's Chapter 11 filing became what many consider the seminal event of the global financial crisis.
"The court was not deceived in a manner that should now be permitted to upset the integrity of the sale order," Peck wrote in a 103-page opinion issued on Tuesday. "The sale process may have been imperfect, but it was still adequate under the exceptional circumstances of Lehman Week."
Peck said any disclosure lapses did not affect the "fairness" or outcome of the sale hearing. He said there was an "undeniably correct" perception at the time that the sale "mitigated systemic risk," helped avert "an even greater economic calamity," and benefited all interested parties.
"The court still would have entered the very same sale order because there was no better alternative and, perhaps most importantly, because the sale to Barclays was the means both to avoid a potentially disastrous piecemeal liquidation and to save thousands of jobs in the troubled financial services industry," he said.
Peck's ruling is a setback for Lehman, which last month projected it would have US$60.1 billion to pay out to creditors, who believe they are owed six times that amount.
Lehman has also sued other banks, including Bank of America Corp and JPMorgan Chase & Co, to recover assets for creditors.
The long-awaited ruling by US Bankruptcy Judge James Peck followed a trial in which Lehman argued that Barclays got a sweetheart deal in acquiring its US investment banking and brokerage operations.
Lehman agreed to sell that business for about US$1.85 billion on September 20, 2008, just five days after the company's Chapter 11 filing became what many consider the seminal event of the global financial crisis.
"The court was not deceived in a manner that should now be permitted to upset the integrity of the sale order," Peck wrote in a 103-page opinion issued on Tuesday. "The sale process may have been imperfect, but it was still adequate under the exceptional circumstances of Lehman Week."
Peck said any disclosure lapses did not affect the "fairness" or outcome of the sale hearing. He said there was an "undeniably correct" perception at the time that the sale "mitigated systemic risk," helped avert "an even greater economic calamity," and benefited all interested parties.
"The court still would have entered the very same sale order because there was no better alternative and, perhaps most importantly, because the sale to Barclays was the means both to avoid a potentially disastrous piecemeal liquidation and to save thousands of jobs in the troubled financial services industry," he said.
Peck's ruling is a setback for Lehman, which last month projected it would have US$60.1 billion to pay out to creditors, who believe they are owed six times that amount.
Lehman has also sued other banks, including Bank of America Corp and JPMorgan Chase & Co, to recover assets for creditors.
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