Lehman letter-of-credit party BP files lawsuit in connection with master agreement default

By Caroline Salls

Pittsburgh, Dec. 22 - Lehman Brothers Holdings, Inc. letter-of-credit parties BP Energy Co. and BP Corp. North America filed a lawsuit Monday in connection with Lehman's alleged improper attempt to draw down the letter of credit, according to a filing with the U.S. Bankruptcy Court for the Southern District of New York.

According to BP's complaint, Lehman entered into a series of energy trades under a 2006 master power purchase and sale agreement.

On July 31, BP said Calyon, London issued a $15 million irrevocable standby letter of credit at BP's request in connection with the purchase and sale agreement.

BP said Lehman now wants to draw down the letter of credit.

However, because of an event of default prompted by Lehman's bankruptcy filing, BP said Lehman is not entitled to draw on the letter of credit and is required to return the letter of credit to BP.

In addition, BP said Lehman owes it a $5.75 million global settlement amount.

BP is also seeking unspecified damages in connection with Lehman's alleged breaches of the master agreement and an implied covenant of good faith.

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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