Lehman Brothers Holdings Inc. is suing a handful of banks along with dozens of investment firms over so-called flip clauses that allowed investors to move ahead of the company to grab assets backing complex derivatives deals.
Lehman affiliates Lehman Brothers Special Financing Inc. and Lehman Brothers Financial Products Inc. filed six lawsuits Tuesday in U.S. Bankruptcy Court in Manhattan to recover funds Lehman says were wrongly transferred to credit-default-swap counterparties after it filed for bankruptcy protection.
Among the defendants named in the suits are Bank of America Corp., Bank of New York Mellon Corp., Citibank, Deutsche Bank, U.S. Bank and Wells Fargo. The banks, as trustees, held the collateral backing the deals.
Lehman says the transfers, which were triggered when the swaps were terminated and the counterparties jumped ahead of Lehman in the payment priority line after its bankruptcy filing, cost its bankruptcy estate and its creditors more than $3 billion.