Lehman Brothers Special Financing sues for $46 million swap payment

By Caroline Salls

Pittsburgh, April 24 - Lehman Brothers Special Financing, Inc. filed a lawsuit Friday against Metropolitan West Asset Management, LLC and Metropolitan West Total Return Bond Fund to recover more than $46 million owed under a swap agreement, according to a Friday filing with the U.S. Bankruptcy Court for the Southern District of New York.

According to the complaint, the defendants have repeatedly acknowledged Lehman Brothers Special Financing's entitlement to the payment of more than $146 million under the swap agreement.

However, Lehman alleges that the Metropolitan entities have paid less than $100 million of the amount owed and have wrongfully withheld payment of the balance "on the basis of a purported but patently unlawful setoff" against obligations allegedly owed to the Total Return Fund by Lehman Brothers Holdings Inc.

Lehman Brothers Special Financing said the setoff relates to "bonds that are totally unrelated to the swap agreement."

As a result, Lehman said it is asking the court to rule that the purported setoff is illegal and that the defendants' are obligated to immediately pay the balance owed under the swap agreement.

The plaintiff is also asking the court to find the Total Return Fund in breach of the swap agreement.

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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