Lehman broker-dealer unit sale upheld on appeal

By Caroline Salls

Pittsburgh, March 16 - District judge Denise Cote affirmed the bankruptcy court order approving Lehman Brothers Holdings, Inc.'s sale of its North American broker-dealer subsidiary Lehman Brothers International to Barclays Capital, Inc., according to a Monday filing with the U.S. Bankruptcy Court for the Southern District of New York.

Cote's ruling stems from an appeal of the sale order filed by Bay Harbour Management, LC, Bay Harbour Master, Ltd., Trophy Hunter Investments, Ltd., BHCO Master, Ltd., MSS Distressed & Opportunities 2 and Institutional Benchmarks.

The appellants are investment funds that maintained prime brokerage accounts with Lehman Brothers International and Lehman Brothers Inc. (Europe).

According to Monday's ruling, the appellants argued that they may have been harmed by an alleged transfer of funds that may have benefited Barclays.

In addition, the appellants said the bankruptcy court's expedited review of the proposed sale was so "grievously flawed" that it deprived them of their due process right to learn whether Barclays was a good faith purchaser and did not give the bankruptcy court itself enough basis to conclude that the sale should be approved. Cote said the appellants asserted these rights "even though any claims they may have to any transferred funds are entirely derivative of LBIE's claims, and LBIE supported the sale."

"As the bankruptcy court found, Barclays demanded that the sale be free and clear of liens, and without that term no sale would have occurred," Cote said in the appeal ruling.

"The bankruptcy court's approval of the sale on these terms was unremarkable and utterly consistent with its duty to maximize the value of the debtors' estate with the benefit of the finality provided by Section 363(m) [of the Bankruptcy Code]."

As a result, Cote dismissed the appeal.

New York-based Lehman Brothers Holdings was 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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