BARCLAYS is in line for an estimated £500m windfall after winning a legal battle with the bankruptcy estate of Lehman Brothers.
Lehman’s creditors were attempting to extract $11bn (£6.8bn) from the bank on the grounds that it had improperly snapped up assets during a fire sale following Lehman’s collapse.
But the bank’s lawyers fended off the attack and made a semi-successful counter-claim to three further groups of assets, one of which was decided in Barclays’ favour.
Subject to a possible appeal by Lehman, the bank will now receive assets valued at $1.9bn, which analysts at Exane BNP Paribas say will equate to extra cash of £500m.
New York bankruptcy Judge James Peck said yesterday Lehman’s estate had not demonstrated “sufficient special circumstances” to invalidate sales of pieces of Lehman at an “asset scramble” follow its collapse.
Lawyers for the Lehman estate argued that Barclays had “ended up with too favourable a deal during a period of market turmoil, uncertainty and confusion” and had acted with the “active and complicit assistance of certain senior executives of Lehman”.
But Peak rejected this view, saying that instead Barclays’ purchase of the assets “benefitted all interested parties, mitigated systemic risk and helped to save every one of us from an even greater economic calamity”.
Barclays’ shares closed up 1.32 per cent on the news at 319p.
TIME LINE | BARCLAYS AND LEHMAN
10 September 2008: Lehman’s market value plummets to $5.92 a share. Barclays and Bank of America both consider a potential takeover of the firm.
13-14 September 2008: US Treasury makes it clear it has no intention of bailing out Lehman. Both Barclays and Bank of America pull out of takeover talks.
15 September 2008: Lehman files for Chapter 11 bankruptcy.
16 September 2008: Barclays announces its intention to purchase Lehman's investment-banking and trading divisions, amounting to nearly $200bn in assets.
17 September 2008: A $1.89bn deal approved by US bankruptcy judge James Peck allows Barclays to purchase Lehman's US brokerage business.
17 November 2009: Lehman files lawsuit against Barclays for $11bn in damages, claiming it was given favourable treatment in a sale that was rushed and “unfair”.
April 2010: Bankruptcy estate of Lehman versus Barclays trial begins. Lehman attorneys claim the court that approved the sale had been mislead.
22 February 2011: Judge Peck, who approved the original deal, states that it "may have been imperfect, but it was still adequate under the exceptional circumstances of Lehman’s week”. Lehman Brothers estate may consider an appeal.