Bloomberg News

Lehman Pitches Plan for Derivatives Claims of Goldman, Banks

June 01, 2011

(Updates with Lehman comment in third paragraph, names of banks in last paragraph.)

June 1 (Bloomberg) -- Lehman Brothers Holdings Inc. is proposing a framework to settle claims against the failed investment bank from Goldman Sachs Group Inc., JPMorgan Chase & Co. and other banks related to derivatives transactions.

Lehman hopes to use the proposal to avoid court fights with 13 banks that are its largest derivatives counterparties and help resolve its bankruptcy case so it can pay creditors, it said in a summary of the plan made public yesterday.

“This is a major step forward in resolving this important group of derivatives claims,” Daniel Ehrmann, Lehman’s head of international operations and co-head of derivatives, said in an e-mailed statement. “We are hopeful that counterparties who have provided input to the framework will settle and look forward to announcing such progress soon.”

About 30 financial institutions filed about $22 billion of derivatives claims, which Lehman estimated would be reduced to about $11 billion, it said yesterday. With the new settlement framework, Lehman expects the aggregate amount of allowed claims of the 30 institutions will be about $10 billion.

The derivatives proposal applies to 13 banks and will be used to determine the amounts of their claims, according to the proposal. It only becomes effective if at least 10 of them accept the plan and settlement agreements are reached by June 30, Lehman said.

‘Vigorously Contest’

The dollar amount of the derivatives claims of the 13 banks under the settlement framework hasn’t been made public, Kimberly Macleod, a Lehman spokeswoman, said.

Lehman will “vigorously contest” the claims of the banks and seek to reduce the claims to amounts lower than those proposed under the settlement plan if it’s not accepted, Lehman said.

Besides Goldman and JPMorgan, the other banks affected by the proposal include Bank of America Corp., Barclays Plc, BNP Paribas, Citigroup Inc., Credit Suisse Group AG, Deutsche Bank AG, Bank of America’s Merrill Lynch unit, Morgan Stanley, Royal Bank of Scotland Group Plc, Societe Generale SA, and UBS AG, according to the plan. Spokespeople for the banks either declined comment or couldn’t immediately be reached for comment.

The case is In re Lehman Brothers Holdings Inc., 08-13555, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

--Editors: John Pickering, Glenn Holdcraft

To contact the reporter on this story: David McLaughlin in New York at

To contact the editor responsible for this story: John Pickering at

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