Barclays’ Lehman Brothers deal to claim disputed assets will go ahead

Caitlin Morrison
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Lehman Brothers employees leaving its offices after the group declared bankruptcy in 2008
The US Supreme Court has cemented a 2014 ruling which allowed Barclays to claim about $4bn (£2.65bn) of disputed assets in its purchase of much of Lehman Brothers’ brokerage unit.

Barclays, which already controlled $3.5bn of the disputed $4bn, was granted leave to take over the assets by the US Court of Appeal last year.

Lehman’s creditors then appealed to the Supreme Court – however the court yesterday declined to hear the appeal.

Barclays originally won approval to buy the brokerage business in September 2008, just days after Lehman Brothers, at one point Wall Street’s fourth-largest investment bank, filed for Chapter 11 protection in the biggest bankruptcy the US has ever seen.

Trustee James Giddens has been seeking to recoup money for the brokerage’s creditors, including Lehman affiliates and hedge funds.

Kent Jarrell, a spokesman for Giddens, said yesterday that the trustee was disappointed by the court’s decision, but would “remain focused on continued progress in winding-down and closing out” the Lehman Brothers estate.

Jarrell added: “The trustee appropriately reserved for the Barclays litigation, so the decision does not impact distributions already completed or assets on hand for potential additional distributions to unsecured general creditors.”

Since Barclays first began the process of buying much of the business, there has been a dispute over how to dispose of the various “cash” assets of the brokerage, including the $4bn of margin assets held by third parties to support a Lehman exchange-traded derivatives business.

Around $1.9bn worth of “clearance box” assets, used to process securities trades, were also in dispute, however they were not part of the Supreme Court appeal.

In 2011, US bankruptcy judge James Peck said Barclays was entitled to the clearance box assets, but not to the margin assets.

However, in 2012, US district judge Katherine Forrest reversed part of Peck’s decision, and ruled that Barclays deserved both.

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