Lehman Brothers International Europe's customer claim ruling revised

By Caroline Salls

Pittsburgh, July 21 - Lehman Brothers International Europe (LBIE) said Lehman Brothers, Inc.'s SIPC trustee has revised his customer omnibus claim determination, increasing the allowed securities and quantities valuation to $8.3 billion from $6.2 billion, according to a news release.

As previously reported, LBIE received an initial determination of its claim from Lehman's SIPA trustee on Sept. 16, 2010 under which the claim for securities had been allowed for a defined list of securities and quantities valued at $6.2 billion.

The trustee deferred his ruling on cash balances owed to LBIE clients for a minimum of 30 days and, with respect to commodities and futures, LBIE's claim was denied.

As a result of this ruling, LBIE said a substantial amount of work would need to be done to complete the remaining reconciliation of the securities component of the omnibus claim with the trustee's determination.

On May 19, LBIE received a letter of determination from the trustee, revising the determination valuation to $8.3 billion, subject to significant conditions.

The company said the revised ruling allows the omnibus claim for a longer defined list of securities and quantities than the September 2010 ruling and includes amounts related to the cash component of the claim.

LBIE said the trustee stressed that the revised ruling does not imply entitlement to the return of the listed securities, nor does it suggest that all of the securities in question are under the trustee's control.

"The timing and eventual level of payout against the omnibus claim remains unknown and is likely to be uncertain for some time to come," the company said in the release.

Remaining issues

Although the revised ruling "represents significant progress," LBIE said issues that still need to be resolved include:

• Allocation of securities and cash. The company said the revised ruling is not broken down by individual clients. LBIE said other issues still need to be resolved until its allocation work can be completed;

• LBIE has requested substantially more detailed information on the cash determination in order to reconcile it to the omnibus claim and then attribute the cash amounts back to underlying clients. As soon as the allocation is prepared, LBIE said it will disseminate the cash and/or securities data to individual clients for their own reconciliation;

• Remaining open items in the securities reconciliation need to be resolved, and answers to a small number of queries raised by LBIE are needed. The company said there are a number of securities templates to be received from Lehman, which impact a significant proportion of the LBIE client base;

• No line-by-line valuation of the securities has been provided. The company said the revised ruling has reduced the amount allowable for securities to $6.1 billion from $6.2 billion, despite allowing for a longer list of securities and quantities; and

• The timing of any recoveries from Lehman remains contingent on the trustee's resolution of a number of issues. The company said the trustee has indicated that litigation will likely be necessary to resolve several of the major categories of claims in dispute, and these disputes will take substantial time to resolve.

In addition, LBIE said other major contingencies in the Lehman estate include any appeal of the Barclays decision and the allocation of estate property between customer property and the general estate.

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 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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