Lehman settles $710 million of JPMorgan asset management fund claims

By Caroline Salls

Pittsburgh, Feb. 1 - Lehman Brothers Holdings Inc. requested court approval of a settlement resolving an objection to JPMorgan Chase Bank, NA's asset management fund claims, according to a Wednesday filing with the U.S. Bankruptcy Court for the Southern District of New York.

Specifically, Lehman said the settlement transaction resolves a claim objection contesting the right of funds sponsored or managed by JPMorgan or one of its affiliates to fully satisfy their claims using the collateral JPMorgan allegedly required Lehman to post before it filed for bankruptcy in September 2008.

The funds filed more than $710 million in secured claims against Lehman on Sept. 22, 2009 on the basis that, as JPMorgan affiliates, their claims were guaranteed by Lehman and secured by the collateral.

The company said the claims filed by the funds included claims for losses related to bonds, unsettled trades, cancelled trades, derivatives unwinds, futures contracts, corporate actions and prime brokerage exposure.

Lehman said it objected to the claims in October, seeking a ruling that the funds were not JPMorgan affiliates and not entitled to rely on the agreement with the bank to assert secured claims.

Under the settlement:

• The funds will return $699.2 million to Lehman that had previously been provisionally allocated to satisfy the claims;

• The funds will retain $15 million of the collateral posted in connection with their claims and any interest earned on the collateral posted for the funds' claims;

• The other JPMorgan entities that are parties to the collateral agreement will waive their rights to the reallocation of the $699.2 million returned to Lehman and the retained cash; and

• The funds will waive a claim for a supplemental $12.5 million payment based on the reversal of a cross-affiliate setoff under derivatives contracts.

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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