Jarden asks court to force Lehman Commercial Paper to resign as agent in light of loan default

By Caroline Salls

Pittsburgh, Dec. 10 - Lehman Commercial Paper Inc. borrower Jarden Corp. has asked the U.S. Bankruptcy Court for the Southern District of New York to force Lehman Commercial Paper to resign as administrative agent and swing line lender of a $1.53 billion credit agreement, according to a Wednesday court filing.

According to the motion, since Lehman Commercial Paper and its related Lehman Brothers Holdings Inc. entities filed Chapter 11 bankruptcy, Lehman Commercial Paper has defaulted on its obligations as swing line lender under the credit agreement, "presumably because it does not have funds available to lend."

As a result, Jarden also asked the court to order Lehman Commercial Paper to decide whether to assume or reject the credit agreement, and, if it decides to assume the loan agreement, to cure the related defaults.

Jarden said the lender's inability to meet its swing line loan obligations has a significant detrimental impact on the borrower's worldwide operations because the availability of a swing line loan is critical to Jarden's ability to effectively manage its daily cash position.

Without any assurance that it has access to swing line loans as needed, Jarden said "undue and significant burdens" are being placed on the company's ability to continue its normal business operations.

Despite the default, Jarden said Lehman Commercial Paper has refused to resign and allow itself to be replaced as the administrative agent and swing line loan lender under the credit agreement.

In addition, Jarden said Lehman Commercial Paper has sought court approval to terminate its agency relations with borrowers, including Jarden.

"Under these circumstances, LCPI's refusal to voluntarily resign is nothing more than a specious effort to hold Jarden hostage under the credit agreement in order to gain leverage and extract value in Jarden's dealings with other Lehman entities," Jarden said in the motion.

A hearing is scheduled for Jan. 14.

New York-based Lehman 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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