Lehman Brothers Holdings Inc. is proposing a wide-ranging settlement of its outstanding derivatives trades with more than a dozen of its largest counterparties, including some of the biggest banks.
The investment bank said this move could help speed the resolution of its Chapter 11 case, the largest and most complex in history. In a framework unveiled Tuesday, Lehman proposed a settlement with 13 of its largest derivatives counterparties, the so-called "big bank counterparties."
If accepted by the banks, the deal could erase billions of dollars in derivatives claims that have been filed against Lehman and its affiliates.
"This is a major step forward in resolving this important group of derivatives claims," said Daniel Ehrmann, managing director at Alvarez & Marsal, the firm that is unwinding Lehman under Chapter 11, and the investment bank's head of international operations and co-head of derivatives. "We are hopeful that counterparties who have provided input to the framework will settle and look forward to announcing such progress soon."
Lehman has been in talks for months with 13 of the banks holding the largest derivatives claims against its estate. In order for the settlement to work, Lehman said at least 10 of the big bank counterparties must sign off on the deal by June 30. Absent that approval, Lehman said it will "vigorously" contest their derivative claims and "intend to seek to reduce such claims to amounts lower than the derivatives framework."
Among the big banks Lehman has sparred with over derivatives are Bank of America Corp., Bank of New York Mellon Corp., Citigroup Inc., Deutsche Bank, Credit Suisse Group and JPMorgan Chase & Co.
