Lehman eliminates $6.1 billion breach claims in Ambac settlement

By Caroline Salls

Pittsburgh, Oct. 6 - Lehman Brothers Holdings Inc. requested court approval of a global claim settlement with Ambac Assurance Corp., Ambac Credit Products, LLC and Ambac Financial Services, LLC, according to a Tuesday filing with the U.S. Bankruptcy Court for the Southern District of New York.

Under the settlement, the Ambac parties have agreed to withdraw the more than $6.1 billion in claims they filed against Lehman, and Lehman and Ambac have agreed to release each other from any liability under specified disputed pre-bankruptcy derivatives transactions.

According to the motion, the claims filed by Ambac are based on Lehman's alleged breach of obligations related to residential mortgage-backed securities transactions.

Lehman said the settlement "resolves the complex interplay of jurisdictional and legal issues" surrounding the company's Chapter 11 cases in New York and the rehabilitation proceedings in Wisconsin involving the Ambac parties.

The company said its official committee of unsecured creditors supports the settlement because it eliminates more than $6.1 billion in claims against Lehman and the need for complex litigation in multiple jurisdictions.

A hearing is scheduled for Oct. 20.

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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