Lehman's Eurosail Mortgage-Backed Bond Isn't in Default, U.K. Court Rules

Investors in a mortgage-backed security sold by Lehman Brothers Holdings Inc. have lost their application for the notes to be declared in default.

A court in London ruled against holders of bonds that were part of the Eurosail-UK 2007-3BL PLC transaction. Lehman, which filed for bankruptcy protection in September 2008, raised 650 million pounds ($1 billion) from the 2007 deal which packaged U.K. home loans.

“Eurosail is not unable to pay its debts” under U.K. bankruptcy law, according to a judgment handed down today.

The investors in A3 notes claimed that the securitization’s assets are worth less than its liabilities, according to a Fitch Ratings report on July 19. The ruling may affect other Lehman Brothers transactions known as Eurosail-UK 2007-4 NP and Eurosail-UK 2007-6 NC, Fitch said.

To contact the reporters on this story: Esteban Duarte in Madrid at eduarterubia@bloomberg.net; Lindsay Fortado in London at lfortado@bloomberg.net

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