Lehman Brothers sues Intel over $1 billion in seized collateral
Bankrupt investment bank Lehman Brothers has sued Intel Corp, accusing the chip maker of seizing $1 billion in collateral in breach of a swap agreement, a court filing showed.business Updated: May 02, 2013 11:54 IST
Bankrupt investment bank Lehman Brothers has sued Intel Corp, accusing the chip maker of seizing $1 billion in collateral in breach of a swap agreement, a court filing showed.
Under the swap agreement, executed days before Lehman filed for bankruptcy in 2008, Intel gave $1 billion to a derivatives unit of Lehman Brothers in exchange for 50.5 million Intel shares, to be delivered on the settlement date of September 29, 2008, according to the filing made in a New York bankruptcy court.
The unit, Lehman Brothers OTC Derivatives Inc (LOTC), posted $1 billion in cash collateral to Intel also as part of the agreement. The agreement specified that Intel would be compensated for losses in case of early termination of the deal.
According to the filing, Intel maintained that Lehman was to deliver "$1 billion in Intel common stock," but Lehman argued that the agreement was to deliver 50.5 million of Intel shares irrespective of the dollar value.
"The value of 50,552,943 shares of Intel common stock on September 29, 2008 was about $873 million, not $1 billion," Lehman said.
Intel terminated the agreement two weeks after the company's bankruptcy filing on September 15, 2008, and seized the entire $1 billion in collateral and has not returned it, Lehman said in the filing.
By seizing the collateral in its entirety, Lehman said "Intel breached the swap agreement."
Lehman is looking to recover from Intel an unspecified amount to be determined at trial.
Intel could not immediately be reached for comment by Reuters outside of regular U.S. business hours.
Lehman filed the largest-ever U.S. bankruptcy on September 15, 2008, with $639 billion in assets. It is in the midst of repaying about $65 billion to creditors under a liquidation plan approved in late 2011.
The case is in re Lehman Brothers Holdings Inc et al vs Intel Corp, Case No. 13-01340, U.S. Bankruptcy Court, Southern District of New York.