Giants Stadium Seeks Information on Lehman Auction-Rate Securities Hedging

Giants Stadium LLC asked a New York bankruptcy court to require collapsed investment bank Lehman Brothers Holdings Inc. (LEHMQ) to provide information on how it hedged auction-rate securities swaps dating to 2007.

The company, which helped finance the construction of the $1.6 billion New Jersey stadium the National Football League team shares with the New York Jets, said Lehman hasn’t provided documents on how it calculated losses on the swaps, according to a court filing yesterday in Manhattan. Lehman in 2008 filed the biggest bankruptcy in U.S. history.

“Giants Stadium is entitled to information concerning the debtors’ derivative valuation methodology as well as information concerning any and all transactions debtors may have entered into in order to offset the risk,” the company, represented by attorneys at Sullivan & Cromwell LLP, said in the filing.

In an interest-rate swap, two parties exchange payments on an agreed-upon amount of principal, typically with one paying a fixed rate while the other pays a floating rate.

The swaps contracts were made with Lehman’s unit Lehman Brothers Special Financing. The bank was to pay the actual rate of interest on auction-rate securities over the term of bonds used to finance building the stadium in exchange for a fixed rate from the Giants, the team said in papers previously filed with the court.

Needs Access

Giants Stadium LLC said it needs access to documents and to interview Lehman representatives to understand the losses on the swaps, which it terminated in 2008, days after Lehman sought court protection. Giants Stadium LLC has filed $301.8 million in claims against Lehman in its bankruptcy case related to swap deals, according to court filings.

In April 2008, Giants Stadium LLC told bondholders it would redeem $100 million in debt, one of seven series of $650 million of bonds it sold for the 84,000-seat stadium in East Rutherford, New Jersey, after interest costs soared. The Jets borrowed $650 million from Citigroup Inc. (C) and the Royal Bank of Canada, while the Giants got the same amount from Goldman Sachs Group Inc. (GS) and Lehman, the Jets said.

Kimberly Macleod, a Lehman spokeswoman, declined to comment.

The case is In re Lehman Brothers Holdings Inc., 08-13555, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Christopher Scinta at cscinta@bloomberg.net

To contact the editor responsible for this story: Anthony Aarons at aaarons@bloomberg.net

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