Lehman project funding borrowers claim lender default, ask court to help recoup funds

By Caroline Salls

Pittsburgh, Nov. 10 - Lehman Brothers Holdings, Inc. borrowers Tuxedo Reserve Owner LLC and Tuxedo TPA Owner LLC asked the U.S. Bankruptcy Court for the Southern District of New York to help it recover funds owed by Lehman under a $128 million loan, according to a Monday court filing.

Tuxedo Reserve and Tuxedo TPA are the owners and developers of a master planned community located in the Town of Tuxedo and Village of Sloatsburg in New York.

The Tuxedo entities said they are the borrowers under a $128 million loan, consisting of a senior loan, building loan and project loan. Lehman Commercial Paper, Inc. is the administrative agent, and Lehman Brothers Holdings is the sole lender.

Tuxedo said the agent and lender are in default for failing to fund their obligations under the loan and they have repeatedly failed to agree to a solution to address the default.

According to the motion, Tuxedo is asking the court to allow it to recoup the funding it has contributed to the community project since the date of Lehman's bankruptcy filing, to appoint an agent to replace Lehman Commercial Paper and to direct either Lehman Commercial Paper or the new agent and Lehman Brothers Holdings to consent to the addition of a lender to fulfill the loan obligations.

In the alternative, Tuxedo asked the court to order Lehman to sell the loans at auction.

A hearing is scheduled for Dec. 3.

New York-based Lehman Brothers Holdings is the fourth-largest investment bank in the United States. The company filed for bankruptcy on Sept. 15. Its Chapter 11 case number is 08-13555.

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