Lehman and Barclays agree to settle DIP financing, escrow fund issues

By Caroline Salls

Pittsburgh, Feb. 7 - Lehman Brothers Holdings Inc. has reached an agreement with Barclays Bank plc and Barclays Capital Inc. that settles issues tied to the company's debtor-in-possession financing, according to a Tuesday filing with the U.S. Bankruptcy Court for the Southern District of New York.

Lehman said it received interim court approval of a DIP loan in September 2008.

Lehman's official committee of unsecured creditors asked the court to reconsider the interim order. The reconsideration hearing has been postponed numerous times during Lehman's bankruptcy case.

According to Tuesday's filing, Lehman withdrew its DIP financing motion on Oct. 8, 2008 after it repaid the outstanding principal, interest and fees owed on the DIP credit agreement.

Lehman said Barclays claims entitlement to a $7.5 million termination fee, which Lehman disputes.

On March 11, 2009, the court authorized Lehman to grant first-priority cash collateral liens in connection with hedging transactions.

Lehman said that order directed it to establish a separate Barclays first-lien bank account, with $10.5 million to be deposited in that account.

The Lehman debtors and Barclays agreed that the debtors would not use the $10.5 million unless they obtained court approval to do so or the debtors and Barclays resolved Barclay's claims under the DIP credit agreement and interim order.

Under the stipulation, $6.25 million in escrowed funds deposited in a Barclays first-lien account will be released and transferred to an account specified by Barclays within three days of the stipulation approval date.

The balance of the escrowed funds, including any interest, will be released to the Lehman debtors.

The motion for reconsideration will be withdrawn by the committee within five business days of the Barclays transfer.

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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