Judge Again Thwarts Lehman’s Attempt to Make Barclays Pay Bonus Claims
Barclays (NYSE:BCS) got a break again as U.S. Bankruptcy Judge James Peck announced hits decision in favor of Barclays in the ongoing legal tussle with Lehman Brothers Holdings. [1] The earlier attempt to squeeze out $11 billion from Barclays under the claims that the London-based bank made a windfall in its acquisition of a part of Lehman’s operations in a flash sale was dismissed by Judge Peck last year. Barclays competes with other global banking institutions and financial services group like Citigroup (NYSE:C), RBS Group (NYSE:RBS), Bank of America (NYSE:BAC), UBS (NYSE:UBS) and JPMorgan Chase (NYSE:JPM).
We maintain a $17.70 price estimate for Barclays stock as we believe the current prices reflect the overwhelming negative sentiment among investors following the deteriorating debt situation in Europe and the substantial impact of the ICB’s report, due on September 12th, on U.K. banks.
The lawsuit is yet another example of Lehman’s desperate attempts to raise cash
Lehman Brothers filed for Chapter 11 bankruptcy in September 2008. The long-drawn bankruptcy proceedings have been inching towards a possible reorganization plan slated for later this year. Meanwhile, Lehman’s trustee Giddens has been trying his best to recover any money from any source in a bid to raise enough capital to pay creditors.
The $500 million claimed by Lehman in this lawsuit related to $2 billion in bonuses that Barclays had agreed to pay Lehman’s employees as compensation at the time of the sale. Lehman alleged that Barclays only paid $1.5 billion of the promised $2 billion amount, and demanded the remaining amount. [2]
Judge Peck’s decision in favor of Barclays stemmed from the fact that Barclays had been able to prove expenses of $1.95 billion, and the $2 billion Lehman quotes was only an estimate.
The last remaining bone of contention between Barclays and Lehman is the $2 billion in margin assets Barclays obtained after its acquisition, which a verdict decided Barclays will have to return to Lehman along with a 5% interest. Barclays is appealing against this verdict, which can reduce its asset base by that value. You can read more about this in our article Barclays Digs in Heels on $2 Billion Lehman Payment.
See our full analysis for Barclays
Notes:- Lehman’s Bonus Claims Against Barclays Challenged by Judge, Bloomberg, Sept 7 2011 [↩]
- Lehman Claims Barclays Underpaid $500 Million for North American Business, Bloomberg, Jul 21 2011 [↩]