Lehman Brothers granted court OK of settlement with Danske Bank

By Jennifer Lanning Drey

Savannah, Ga., Oct. 25 - Lehman Brothers Holdings Inc. and Lehman Commercial Paper Inc. received court approval of a settlement with Danske Bank A/S, London Branch, resolving a dispute over the proceeds from residential mortgage assets, according to a Monday filing with the U.S. Bankruptcy Court for the Southern District of New York.

Under the settlement, Danske will receive all of Lehman Brothers Holdings' and Lehman Commercial Paper's right, title and interest as lender under the residential mortgage assets as of the default date.

Lehman Commercial Paper will receive $1.2 million of cash currently held in escrow due to the dispute, while Danske will receive $33.73 million.

Danske will release Lehman Brothers Holdings and Lehman Commercial Paper in all respective claims.

Lehman Commercial Paper and Danske were previously parties to a master repurchase agreement. In connection with the agreement, Lehman Commercial Paper and Danske entered into a committed repurchase facility agreement under which residential mortgage loans and REO properties were sold to Danske.

Additionally, Lehman Commercial Paper, Danske and the Bank of New York entered into a tri-party custody agreement under which Lehman Commercial Paper issued a guarantee to Danske covering certain obligations related to the mortgage assets.

In 2008, Danske claimed an event of default had occurred under the agreements as a result of Lehman Brothers Holdings' filing for Chapter 11 bankruptcy. Danske claimed it had become entitled to Lehman Commercial's ownership interest in the residential assets.

The parties entered into a dispute, causing proceeds from the residential mortgage assets to be deposited into the escrow account. As of Sept. 27, there was $34.93 million in the escrow account.

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 in the U.S. Bankruptcy Court for the Southern District of New York. Its Chapter 11 case number is 08-13555.

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