Zurück
The Michigan State Housing Development Authority, which sued Lehman Brothers Holdings Inc. (LEHMQ) in bankruptcy court over derivatives transactions, said it is seeking to move its suit to a higher court.
The Lehman bankruptcy judge’s interpretation of swap contracts is “surpassingly broad” and requires U.S. District Court review because it has ramifications for international securities markets, the authority said yesterday in court papers. The global over-the-counter derivatives market is valued at $601 trillion by the Bank for International Settlements.
The Michigan agency is “one of many” derivatives trading partners of Lehman disputing who gets paid first on a swap agreement as a result of a previous ruling by U.S. Bankruptcy Judge James Peck, it said in the filing. While that case involving a Bank of New York Mellon Corp. (BK) trustee unit was settled, Peck’s ruling stands, it said.
“The bankruptcy court continues to adhere to the reasoning of BNY Trustee -- while the correctness of that decision remains very much unresolved,” it said, referring to Peck’s ruling.
In the BNY case, Peck ruled in Lehman’s favor, saying that a swap agreement written to protect both parties from default by the other party didn’t apply under bankruptcy law. He used a similar principle earlier this month when he refused to dismiss a Lehman suit against an entity known as Ballyrock ABS CDO 2007- 1 Ltd., the Michigan agency said.
Housing Agency’s Work
The authority sells bonds to raise money to help fund home mortgages and rental housing developments. It struck a swap agreement with a Lehman unit in 2000 to offset its interest rate risk as a borrower, according to the filing. The agreement allowed either party to end the transaction if the other defaulted, it said.
After the Lehman unit filed for bankruptcy, the state agency terminated the agreement by wiring the $36.3 million owed to the unit. Lehman later made an “improper demand” for payment of a $2.4 million semi-annual premium from the agency’s bank and failed to return the money even though it admitted the transfer was a mistake, according to the filing.
Peck put on hold the housing agency’s lawsuit -- and a Lehman countersuit -- making it impossible for the agency to defend itself, it said.
The lawsuit is Michigan State Housing Development Authority v. Lehman Brothers Derivative Products, 09-01728, U.S. Bankruptcy Court, Southern District of New York (Manhattan). The bankruptcy case is In re Lehman Brothers Holdings Inc., 08- 13555, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
www.bloomberg.com/news/2011-05-18/...higan-agency-says-1-.html
The Lehman bankruptcy judge’s interpretation of swap contracts is “surpassingly broad” and requires U.S. District Court review because it has ramifications for international securities markets, the authority said yesterday in court papers. The global over-the-counter derivatives market is valued at $601 trillion by the Bank for International Settlements.
The Michigan agency is “one of many” derivatives trading partners of Lehman disputing who gets paid first on a swap agreement as a result of a previous ruling by U.S. Bankruptcy Judge James Peck, it said in the filing. While that case involving a Bank of New York Mellon Corp. (BK) trustee unit was settled, Peck’s ruling stands, it said.
“The bankruptcy court continues to adhere to the reasoning of BNY Trustee -- while the correctness of that decision remains very much unresolved,” it said, referring to Peck’s ruling.
In the BNY case, Peck ruled in Lehman’s favor, saying that a swap agreement written to protect both parties from default by the other party didn’t apply under bankruptcy law. He used a similar principle earlier this month when he refused to dismiss a Lehman suit against an entity known as Ballyrock ABS CDO 2007- 1 Ltd., the Michigan agency said.
Housing Agency’s Work
The authority sells bonds to raise money to help fund home mortgages and rental housing developments. It struck a swap agreement with a Lehman unit in 2000 to offset its interest rate risk as a borrower, according to the filing. The agreement allowed either party to end the transaction if the other defaulted, it said.
After the Lehman unit filed for bankruptcy, the state agency terminated the agreement by wiring the $36.3 million owed to the unit. Lehman later made an “improper demand” for payment of a $2.4 million semi-annual premium from the agency’s bank and failed to return the money even though it admitted the transfer was a mistake, according to the filing.
Peck put on hold the housing agency’s lawsuit -- and a Lehman countersuit -- making it impossible for the agency to defend itself, it said.
The lawsuit is Michigan State Housing Development Authority v. Lehman Brothers Derivative Products, 09-01728, U.S. Bankruptcy Court, Southern District of New York (Manhattan). The bankruptcy case is In re Lehman Brothers Holdings Inc., 08- 13555, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
www.bloomberg.com/news/2011-05-18/...higan-agency-says-1-.html
