Bankrupt Lehman Brothers Holdings Inc. (LEHMQ), in a settlement with its Bermuda-based Lehman Re life insurance unit, reduced the subsidiary’s $2.3 billion in claims to $1 billion, according to a court filing.
The settlement between Lehman and two affiliates and Lehman Re and a subsidiary and creditor, resolves claims connected to a 1999 repurchase agreement involving residential and commercial mortgages and a 2007 “Net Worth Maintenance Agreement,” lawyers for the entities said in a filing in federal bankruptcy court in Manhattan.
The repurchase agreement claim is now valued at $490 million, and the maintenance agreement is now an allowed claim of $415 million, the attorneys said.
Lehman Re filed a Chapter 15 petition for bankruptcy protection in August 2009, citing alleged shortfalls on its reinsurance obligations and lawsuits against it in the U.S.
Lehman, which is preparing its first payment to creditors after more than three years in bankruptcy, has been whittling down claims and settling disputes to boost the distribution. The former investment bank has said it could distribute $11.9 billion to $14.7 billion initially, depending on cash reserves for disputed claims. Lehman has estimated disputed claims at $112 billion.
Attorneys for the Lehman entities are seeking bankruptcy court approval for the settlement.
The case is In re Lehman Brothers Holdings Inc., 08-13555, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
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