Lehman gets court OK on open trade confirmations; two of three late objections overruled

By Rebecca Melvin

New York, Dec. 16 - Lehman Brothers Holdings Inc.'s request for assumption or rejection of certain pending trade agreements was approved by the U.S. Bankruptcy Court for the Southern District of New York on Tuesday, despite a number of outstanding objections that were adjourned to a later hearing.

Resolved objections included those from GoldenTree Asset Management, Barclays Bank, Blackrock Financial Management, and the Bank of Nova Scotia, Lehman counsel, Lori Fife of Weil Gotshal & Manges LLP told the court.

All unresolved objections, including those from Deutsche Bank and Wachovia, which will be heard Dec. 22, and those from the likes of Citigroup and KKR Debt Investors Whippoorwill Associates, will be heard Jan. 14.

"We would like to hand up an order today as to hundreds of trades to which there was no objection, as it is in the best interest of the loan trading industry," Fife told the court.

The assumed trades consist mostly of sell-position trades that were agreed upon at a time when market conditions were more favorable than they are today. The estates will realize significant value from the assumption of these agreements.

Lehman proposes to reject most of its buy-position trades, which will relieve the estates of their obligation to purchase devalued loan interests.

The committee of unsecured creditors backed the motion, saying it was satisfied that Lehman exercised sound business judgment.

Two late objections overruled

Three late-filed objections were considered during with hearing, with two overruled, including those of Pyrrhuloxia LP and the Halbis Distressed Opportunity Master Fund; but a third, from M&G Investment Management Ltd., was allowed to be carried forward.

Judge James Peck said he overruled those that were late without a good excuse.

"Pleading deadlines will be strictly applied unless there is a really good reason to deviate," Peck said, adding that to do otherwise would invite chaos.

M&G argued that it was late because Lehman changed its position from rejection to assumption in regard to M&G's trade agreements.

Uncontested items approved

A number of uncontested items were approved at the Dec. 16 omnibus hearing including the hiring of Lazard Freres & Co. as investment bankers, subject to court approval before any fees are paid; Bortstein Legal LLC as special counsel to deal with IT vendor contracts and licenses; McKenna Long & Aldridge LLP as special counsel with regard to disposal of real estate assets; and Natixis Capital Markets Inc. as strategic adviser with respect to a multitude of derivative contracts.

The employment of Houlihan Lokey Howard & Zukin Capital Inc. as investment banker to the official committee of unsecured creditors was also approved.

In addition, a stipulation with regard to Sumitomo Mitsui Banking Corp.'s request for relief from the automatic stay to foreclosure on collateral related to $350 million in loans was approved.

The loan is secured by collateral posted by LB Commercial. In exchange for a portion of collateral provided, Sumitomo agreed not to seek further relief from the automatic stay until at least March 15.

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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