Lehman Brothers Holdings Inc. and Societe Generale have struck a settlement of pending litigation under which Lehman stands to recover at least $445 million.
The settlement, court papers show, relates to a dispute between Lehman and Societe Generale over the termination of two credit default swap agreements in 2008 in the weeks following Lehman's Chapter 11 bankruptcy filing.
The agreements relate to two special-purpose vehicles, Libra CDO Ltd and MKP Vela CBO Ltd., which were set up to invest in mortgage-backed securities.
The settlement that Lehman filed in bankruptcy court Monday ensures that the investment bank recovers something on its claims. The deal, which remains subject to court approval, requires Societe Generale to immediately pay Lehman $370 million and calls on the French bank to guarantee that Lehman recover $75 million from Libra and Vela, putting Lehman's total recovery at $445 million. The deal also gives Lehman the right to pursue further litigation against the investment vehicles that could yield an extra $72 million and puts the investment bank in a better position to request the "prompt return" of $128 million in collateral.
