Lehman, SunCal parties reach settlement, clear plan confirmation path

By Caroline Salls

Pittsburgh, Oct. 25 - Lehman Brothers Holdings Inc. requested court approval of a lawsuit settlement reached with SunCal real estate project parties, according to a Monday filing with the U.S. Bankruptcy Court for the Southern District of New York.

Lehman said it provided $1.8 billion in senior secured financing to direct and indirect subsidiaries and/or affiliates of SCC Acquisitions, Inc. to acquire and develop real estate projects located in California.

After Lehman filed for bankruptcy, some of the SCC units and affiliates became debtors under voluntary and involuntary bankruptcy cases filed in the U.S. Bankruptcy Court for the Central District of California.

The Lehman debtors have filed plans of reorganization for several of the SunCal debtors.

According to the motion, Lehman's creditors have been involved in substantial litigation in the SunCal debtors' Chapter 11 cases to preserve their sizable investments in the SunCal projects.

Lehman said the settlement is critical to resolution of this "costly and protracted" litigation and integral to confirmation of the Lehman-SunCal plans.

"Entering into the SunCal settlement transaction will result in significant cost savings and resolve what has been several years of litigation and failed attempts at mediation," the company said in the motion.

"Further, the SunCal settlement transaction provides the Lehman creditors with a clear path to confirmation of the Lehman-SunCal plans without the uncertain outcome inherent in a competing plan contest and resulting in the conveyance to the Lehman creditors of the plan projects (other than the interim loan projects) in fairly short order."

The terms of the proposed settlement include the following:

• Mutual releases tied to SunCal project and Lehman loan claims;

• The dismissal of all pending lawsuits that any of the SunCal parties or voluntary debtors filed against the Lehman parties, except those related to the Pacific Point project of SunCal's SJD debtors;

• The withdrawal of the SunCal plans and objections to the Lehman-SunCal plans filed by some of the SunCal parties;

• The granting of an option to SCC Acquisitions to purchase the SunCal projects owned by SunCal OVC and Delta Coves for a price the Lehman creditors believe is at least equal to the fair market value of those projects;

• The release by the Lehman lenders of any direct or indirect liens and/or security interests they have on interim loan assets; and

• The SunCal parties' agreement to accept the Lehman-SunCal plans.

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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