Lehman trustee, Barclays continue fight over asset entitlement

By Caroline Salls

Pittsburgh, April 29 - Lehman Brothers Holdings Inc. asset purchaser Barclays Capital Inc. said Friday that there is still a dispute between Barclays and Lehman Brothers Inc.'s Securities Investor Protection Act liquidation trustee related to delivery of "Clearance Box" assets, according to a brief filed April 29 with the U.S. Bankruptcy Court for the Southern District of New York.

In February, judge James M. Peck denied Lehman's motion for relief of the 2008 asset sale and granted Barclays' motion to recover the Clearance Box assets.

However, Barclays said in the April 29 filing that it does not agree with the trustee on the issue of whether it is entitled to an actual delivery of the Clearance Box assets that have not yet been delivered or is only entitled to money damages plus prejudgment interest.

Barclays said there is also a dispute over what assets are considered undelivered Clearance Box assets.

Barclays is asking the court to either order the trustee to deliver the assets it has identified or order a process to finalize the list of all undelivered Clearance Box assets.

According to Barclays' filing, it is entitled to delivery of all Clearance Box assets, plus any distributions or payments made on those assets since the sale closing.

"Barclays filed a motion to enforce the sale order to secure the actual delivery of all undelivered purchased assets; Barclays did not file an adversary complaint to recover money damages for a breach of contract," the buyer said in the brief.

Barclays said the sale order and the Feb. 22 ruling require the actual delivery of the assets in question.

In addition, Barclays said the Clearance Box assets should include physical certificates for securities, although Lehman Brothers Inc.'s principal clearance boxes have been in electronic form for many years.

The buyer said the Clearance Box assets should also include some of the assets Lehman Brothers Inc. purchased on margin for customers and had the power to transfer or sell.

Specifically, Barclays is asking the court to rule that it is entitled to $2.3 billion in margin assets needed to satisfy debts assumed on behalf of futures customers transferred from Lehman Brothers Inc., as well as $1.5 billion in margin assets that were not cash or cash equivalents.

Also, Barclays said it is entitled to clearing funds and guaranty funds needed to operate Lehman's ETD business.

Barclays also asked the court to rule that it is entitled to $769 million in securities if and when the trustee decides he has enough assets to satisfy all legitimate customer claims.

As previously reported, Barclays asked the bankruptcy court to enforce the sale order after Lehman claimed that Barclays received $8.2 billion more than it should have in the asset sale.

A hearing on the implementation of the Feb. 22 ruling is scheduled for May 9.

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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