Lehman Special Financing counterparty files contract termination suit

By Caroline Salls

Pittsburgh, Feb. 10 - Lehman Brothers Special Financing, Inc. former swap contract counterparty Tempe Life Care Village, Inc. filed a lawsuit Thursday asking the U.S. Bankruptcy Court for the Southern District of New York to rule that the swap agreements were properly terminated on Aug. 26, 2009.

The face amount of each of the Lehman/Tempe Life Care swap agreements was $10 million.

Tempe Life Care said Lehman indicated in November 2008 that it might assume and assign some or all of its "in the money" derivatives contracts in exchange for consideration that would provide value to Lehman's estates.

The Tempe Life Care swap agreements were two of the contracts Lehman said it might assume.

However, the plaintiff said it found out in the spring of 2009 that Lehman was having trouble finding counterparties willing to accept assignment of the swap agreements.

After settlement negotiations with Tempe Life Care fell through, Tempe Life Care told Lehman in August 2009 that it was terminating the contracts.

Tempe Life Care said Lehman's bankruptcy filing gave the plaintiff the right to enforce an early termination of the swap contracts, which Lehman disputed.

Under the swap agreements, no further payments are required after the termination date, and anything due on the contracts must be paid on the termination date.

In the lawsuit, Tempe Life Care claims that Lehman has "unilaterally and improperly refused to engage" in court-ordered derivatives procedures on the grounds that it had voided Tempe Life Care's contractual right to terminate the agreements.

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.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.