Lehman granted approval of Bankhaus loan ownership settlement

By Caroline Salls

Pittsburgh, Jan. 15 - Lehman Brothers Holdings, Inc. received court approval of a settlement agreement with the insolvency administrator of Lehman Brothers Bankhaus AG that resolves a dispute over the ownership of loans, according to a Thursday filing with the U.S. Bankruptcy Court for the Southern District of New York.

According to the motion, the Lehman parties entered into commercial and real estate loan participations with Bankhaus before their bankruptcy filing under which one party or one of its affiliates would act as the lender of record and/or agent, and the other party would acquire participation interests in those loans.

Lehman said a dispute had arisen over whether the participations documented using a U.S.-style form are true sales.

If they are not, the company said Bankhaus would not hold a property interest in the underlying loans when it is a participant and one of the Lehman parties is a lender, but rather, only an unsecured claim against the applicable Lehman party.

Until the issue was resolved, Lehman said neither party was willing to commit funds or devote the time and resources necessary to maximize value.

Under the agreement, the Lehman parties will purchase Bankhaus' interests in the U.S.-style participations under which both Lehman and Bankhaus are lenders.

As a result, the ownership of the loans will be transferred to the Lehman parties for a net payment of $1.389 billion.

Lehman said the purchase price for the loans and participations being acquired by the Lehman parties is below both the $3.459 billion outstanding principal balance of the loans, as well as their $2.149 billion total current market value.

New York-based Lehman Brothers Holdings 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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