Lehman Brothers settles JPMorgan’s $7.68bn claim

1 March 2010

Failed financial firm Lehman Brothers is to pay JPMorgan $557 million and allow the bank to retain $7.1 billion in collateral as part of a settlement for a bankruptcy filing.

According to court documents, JPMorgan is planning on transferring illiquid securities worth several billion dollars back to the collapsed bank.

The filing relates to the period before the bankruptcy of Lehman Brothers when JPMorgan worked as the clearing bank on behalf of the struggling institution’s brokerage unit.

JPMorgan required the banking offshoot to pledge collateral to act as a guarantee for borrowed funds.

A claim for over $29 billion was filed against Lehman Brothers in September 2008 after the collapse - the amount was reduced over
time by JPMorgan drawing on the collateral.

The new financial agreement is expected to settle the outstanding balance of the filing.

Kimberly Macleod, Lehman Brothers spokeswoman, was quoted by Bloomberg as saying: “The settlement allows Lehman to more efficiently manage billions of dollars worth of its illiquid assets thereby maximizing the return on those assets for the benefit of its creditors.

“The parties to the settlement have reserved all rights with respect to claims they have against each other.”

Both sides have retained the right to dispute claims in the future while the arrangement is yet to receive approval from the court.

By Jim Ottewill

Become a bobsguide member to access the following

1. Unrestricted access to bobsguide
2. Send a proposal request
3. Insights delivered daily to your inbox
4. Career development