Lehman borrowers ask court to force company to meet loan obligations

By Caroline Salls

Pittsburgh, Nov. 5 - Lehman Brothers Holdings, Inc. borrower 1407 Broadway Real Estate LLC and its asset manager PGRS 1407 BWAY LLC asked the U.S. Bankruptcy Court for the Southern District of New York to force Lehman to comply with its lending obligations, according to a Thursday court filing.

Alternatively, the 1407 Broadway entities are asking the court to grant them relief from the automatic stay so they can declare Lehman and Lehman Commercial Paper Inc. in default of the loan, suspend all loan payments and find a replacement lender for the unfunded portion of the loan.

According to the motion, Lehman agreed to lend 1407 Broadway $127.25 million in January 2007 and made an initial loan of $106 million.

1407 Broadway said it used a portion of those funds to acquire a sub-leasehold estate in an office building and to fund various operating expenses and capital improvements to the property.

1407 Broadway said the $21.25 million unfunded balance was to be available as needed to make improvements to the building and to pay leasing commissions.

The company said it has made six draw requests since late April 2009, seeking a total of $3.7 million of the unfunded balance, but Lehman has failed to meet its lending obligations.

As recently as July, the 1407 Broadway entities said they were advised by Lehman's loan servicer that Lehman had transferred money to the servicer to fund some of the draw requests.

However, the entities said those funds were never paid to them and have supposedly been returned by the servicer to Lehman.

1407 Broadway said Lehman said it no longer has obligations under the loan, "but has provided no concrete information or evidence to confirm that assertion."

A hearing is scheduled for Dec. 16.

New York-based Lehman Brothers Holdings Inc. was the fourth-largest investment bank in the United States. The company filed for bankruptcy on Sept. 15, 2008. Its Chapter 11 case number is 08-13555.

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