Barclays Digs in Heels on $2 Billion Lehman Payment

by Trefis Team
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Barclays’ (NYSE:BCS) request for additional time from a U.S. judge so that it can appeal against the decision of the U.S. bankruptcy court shows its intention to not pay up without a fight. [1] The U.S. bankruptcy court handling the liquidation of Lehman Brothers had asked Barclays to shell out $2 billion in margin assets it obtained after its acquisition of Lehman Brothers along with 5% interest in a verdict passed early in June. [2] The London based global bank 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).

Our $18.30 price estimate for Barclays stock is a premium of roughly 20% to the market price.

Barclays could actually be pushing its luck too much…

The legal battle between Barclays and Lehman Brothers has continued since late 2008 when Barclays acquired a significant part of the once fourth largest investment bank in the U.S. as a part of a flash sale. The significant profit to Barclays in the deal was evident within months and Lehman demanded a whopping $11 billion as compensation for the “windfall” as a part of one court case in addition to contesting that Barclays’ claims over margin assets worth $2 billion were unfounded.

To Barclays relief, the first case was decided in its favor and Lehman’s demands were dismissed. It wasn’t so lucky with the second decision going against it, which we discussed in detail in our article, Court Asks Barclays to Fork Over $2 Billion in Lehman Assets.

… but it could mean relief to investors in the short-term

By making changes to the chart above, the $2 billion settlement will not affect Barclays’ share value significantly. However, Barclays’ would certainly like to avoid or delay letting go of these assets for as long as possible.

See our full analysis for Barclays

  1. Barclays Seeks to Delay $2 Billion Lehman Brokerage Payment During Appeal, Bloomberg, Jul 13 2011 []
  2. Lehman Brokerage Gets $2 Billion From Barclays in Ruling on Margin Assets, Bloomberg, Jun 6 2011 []
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