Court upholds Barclays’ entitlement to $5.9 billion of Lehman assets

By Caroline Salls

Pittsburgh, Aug. 5 – Lehman Brothers Holdings Inc. asset purchaser Barclays is entitled to keep a total of $5.9 billion in margin and clearance box assets after the U.S. Court of Appeals for the Second Circuit upheld a district court ruling on entitlement to two sets of assets in connection with the 2008 sale, according to a Tuesday appeals court ruling.

James W. Giddens, the trustee appointed under the Securities Investor Protection Act (SIPA) to protect public customers and creditors in the liquidation of Lehman, appealed a ruling by the U.S. District Court for the Southern District of New York that partially overturned a bankruptcy court order on the asset entitlement issue.

The U.S. Bankruptcy Court for the Southern District of New York ruled in 2011 that Barclays had not purchased the margin assets, but that it was conditionally entitled to the clearance box assets.

On appeal, the district court said Barclays was entitled to both the $4 billion in margin assets and the $1.9 billion in clearance box assets. Giddens appealed the district court order to the appeals court.

According to Tuesday’s filing, the margin assets are cash and cash equivalents held by third parties to secure Lehman’s exchange-traded derivatives business, and the clearance box assets are comprised of unencumbered securities held in the company’s “clearance box” at the Depository Trust Clearing Corp.

New York-based Lehman Brothers Holdings Inc. was the fourth-largest investment bank in the United States. The company emerged from bankruptcy on March 6, 2012.

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