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Lehman Brothers files complaint to protect $150 million in collateral
By Lisa Kerner
Charlotte, N.C., Nov. 30 - Lehman Brothers Holdings Inc. debtor and debtor in possession Lehman Brothers Special Financing Inc. filed a complaint against trustee Bank of America, NA, Ceago ABS CDO 2007-1, Ltd., Ceago ABS CDO 2007-1, LLC and controlling noteholder Long Island International Ltd., according to a Tuesday filing with the U.S. Bankruptcy Court for the Southern District of New York.
LBSF filed the adversary proceeding "to prevent certain unenforceable ipso facto clauses from improperly modifying LBSF's right to priority of payment with respect to approximately $150 million in collateral in connection with a collateralized debt obligation transaction called Ceago ABS CDO 2007-1."
Lehman Brothers is LBSF's credit support provider and guarantor under derivative swap agreements in connection with the Ceago transaction.
Long Island International, as a result of certain post-petition actions taken by Bank of America, can direct the Bank of America to terminate the swap agreements and liquidate the collateral it holds.
The controlling noteholder contends that it can exercise this power without LBSF's consent.
LBSF's resulting loss of its senior payment priority position by operation of the priority modification provisions would cost the bankruptcy estate and its creditors approximately $150 million, the filing said.
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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