NEW YORK, Nov 30 (Reuters) - A unit of Lehman Brothers Holdings Inc, which filed the largest U.S. bankruptcy, has sued Bank of America Corp to stop it from taking $150 million of collateral that Lehman says belongs to creditors.
Lehman Brothers Special Financing Inc said in the lawsuit that it is a party to swap agreements related to a collateralized debt obligation for which Bank of America serves as trustee.
Lehman said it has a 'priority payment right' to collateral tied to the CDO, known as Ceago ABS CDO 2007-1. Lehman argues that Bank of America's actions as trustee allow an investor in the CDO to direct that the swap agreements be terminated and the collateral liquidated.
This, Lehman said, would violate bankruptcy law, and 'cost the bankruptcy estate and its creditors approximately $150 million,' according to the complaint filed in the U.S. bankruptcy court in Manhattan on Monday night.
A spokesman for Charlotte, North Carolina-based Bank of America did not immediately respond to a request for comment.
According to the complaint, the CDO investor is Long Island International Ltd, a privately held company based in London. Long Island International, which is also a defendant in the case, could not immediately be reached for comment.
Once the fourth-largest U.S. investment bank, Lehman filed for Chapter 11 protection from creditors on Sept. 15, 2008. It is trying to repay creditors still owed hundreds of billions of dollars.
On Nov. 16, U.S. Bankruptcy Judge James Peck ordered Bank of America to return $500 million of deposits it seized from Lehman shortly after the bankruptcy filing. Peck also oversees Lehman litigation related to the bankruptcy case.
The case is Lehman Brothers Special Financing Inc v. Bank of America NA et al, U.S. Bankruptcy Court, Southern District of New York, No. 10-ap-04331. The main bankruptcy case is In re: Lehman Brothers Holdings Inc in the same court, No. 08-13555.
(Reporting by Jonathan Stempel; Editing by Lisa Von Ahn) Keywords: LEHMAN/BANKOFAMERICA LAWSUIT (jon.stempel@thomsonreuters.com +1 646 223 6317; Reuters Messaging: jon.stempel.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
Lehman Brothers Special Financing Inc said in the lawsuit that it is a party to swap agreements related to a collateralized debt obligation for which Bank of America serves as trustee.
Lehman said it has a 'priority payment right' to collateral tied to the CDO, known as Ceago ABS CDO 2007-1. Lehman argues that Bank of America's actions as trustee allow an investor in the CDO to direct that the swap agreements be terminated and the collateral liquidated.
This, Lehman said, would violate bankruptcy law, and 'cost the bankruptcy estate and its creditors approximately $150 million,' according to the complaint filed in the U.S. bankruptcy court in Manhattan on Monday night.
A spokesman for Charlotte, North Carolina-based Bank of America did not immediately respond to a request for comment.
According to the complaint, the CDO investor is Long Island International Ltd, a privately held company based in London. Long Island International, which is also a defendant in the case, could not immediately be reached for comment.
Once the fourth-largest U.S. investment bank, Lehman filed for Chapter 11 protection from creditors on Sept. 15, 2008. It is trying to repay creditors still owed hundreds of billions of dollars.
On Nov. 16, U.S. Bankruptcy Judge James Peck ordered Bank of America to return $500 million of deposits it seized from Lehman shortly after the bankruptcy filing. Peck also oversees Lehman litigation related to the bankruptcy case.
The case is Lehman Brothers Special Financing Inc v. Bank of America NA et al, U.S. Bankruptcy Court, Southern District of New York, No. 10-ap-04331. The main bankruptcy case is In re: Lehman Brothers Holdings Inc in the same court, No. 08-13555.
(Reporting by Jonathan Stempel; Editing by Lisa Von Ahn) Keywords: LEHMAN/BANKOFAMERICA LAWSUIT (jon.stempel@thomsonreuters.com +1 646 223 6317; Reuters Messaging: jon.stempel.reuters.com@reuters.net) COPYRIGHT Copyright Thomson Reuters 2010. All rights reserved. The copying, republication or redistribution of Reuters News Content, including by framing or similar means, is expressly prohibited without the prior written consent of Thomson Reuters.
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