Lehman Brothers Holdings Inc.’s U.K. unit won its appeal over the interpretation of hedging contracts with the failed bank’s Swiss subsidiary.
The ruling may result in London-based Lehman Brothers International Europe and its administrators PricewaterhouseCoopers LLP receiving an extra $1 billion, according to a written decision handed down this morning by Judge Mary Arden in the U.K. Court of Appeals.
Lehman spread risk from its derivatives trades by using inter-company agreements with Swiss unit Lehman Brothers Finance SA. The appeal dealt with how those contracts should be closed out and whether a letter setting out conditions for unwinding those deals should be considered.
“The side letter should be taken into account for the purposes of determining the value” of the transactions, Arden ruled, allowing PwC’s appeal and overturning a prior ruling. Stephanie Howel, a spokeswoman for PwC, didn’t immediately comment.
PwC settled legal disputes with Lehman’s U.S. bankruptcy trustee in February, paving the way for the return of money to the U.K. unit’s creditors. PwC announced its first distribution to creditors last April, more than three-and-a-half years after what was once the fourth-largest U.S. investment bank filed the biggest bankruptcy in American history, listing $613 billion in debts and setting off a global credit crunch.
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