BofA Posts $595 Million Bond in Lehman Bankruptcy
Bank of America Corp., ordered by a bankruptcy judge to return deposits taken from Lehman Brothers Holdings Inc. and pay interest, posted a $595 million bond in court in Manhattan, according to a filing.
Bank of America was a lender to Lehman in September 2008, and took a $500 million deposit after the bankruptcy to offset an unrelated loan, according to court papers. U.S. Bankruptcy Judge James Peck has said he will consider whether to impose sanctions on Bank of America for ignoring a law that stops lenders from acting to recover their loans from companies in bankruptcy.
Bank of America, based in Charlotte, North Carolina, said last month it reserves its right to appeal Peck’s ruling. Based on banking law, the appeal has “a substantial possibility of success,” it said.
Under U.S. accounting rules set by the Financial Accounting Standards Board, banks must set aside reserves for a potential legal loss when the loss becomes probable and the amount can be “reasonably” estimated.
Asked if Bank of America had reserved for the Lehman judgment, spokesman Lawrence Grayson said, “the FASB standards continue to apply.”
The bond was filed by Travelers Indemnity Co.
The case is Bank of America NA v. Lehman Brothers Holdings Inc., 08-01753, both in U.S. Bankruptcy Court, Southern District of New York (Manhattan).
To contact the reporter on this story: Linda Sandler in New York at lsandler@bloomberg.net
To contact the editor responsible for this story: David E. Rovella at drovella@bloomberg.net
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