Barclays Says Lehman Accord to Boost Profit by $750 Million

Updated on

Barclays Plc said it will boost pretax profit by about $750 million after resolving a long-running asset fight with the remnants of Lehman Brothers Holdings Inc.

The accord over the 2008 sale of Lehman’s brokerage assets to Barclays will give the British lender all except $80 million of the $1.1 billion of disputed assets, the U.K. bank said in a statement Friday.

The settlement needs approval from a federal bankruptcy judge in Manhattan, which could take several weeks, Barclays said in the statement. A hearing was set for June 29.

The deal is a win for Barclays Chief Executive Officer Antony Jenkins, who has been seeking ways to shore up earnings, cutting thousands of jobs and shrinking securities operations. The former retail banker took over in 2012 from Robert Diamond, who had led a 15-year expansion of the lender’s fixed-income operations, capped by the Lehman asset purchase.

The U.S. Supreme Court this month rejected an appeal from James Giddens, Lehman’s trustee, leaving intact a ruling that Barclays is entitled to billions of dollars in assets stemming from Lehman’s collapse. The ruling had left only $1.1 billion in dispute.

‘Every Avenue’

“It has always been our duty to prudently and diligently pursue every avenue of recovery for assets we believe belong to the estate, and we did so on behalf of creditors by taking the Barclays litigation all the way to the Supreme Court,” the trustee said Friday in a statement about the deal.

The settlement will allow Giddens to release reserves of more than $600 million to Lehman’s general estate for creditors in the biggest U.S. bankruptcy, the trustee’s lawyers said in a court filing seeking approval of the deal.

The settlement also avoids potential litigation in the U.K. over assets claimed by London-based Barclays that were owned by Lehman’s European operation, according to the filing.

Barclays bought most of New York-based Lehman’s North American brokerage assets. Giddens sought to recoup the money, most of which was already in Barclays’s possession, arguing creditors had deserved to get more value.

The transfer of the brokerage’s margin assets was included in the purchase agreement and confirmed in a clarification letter for the sale contract, the U.S. Court of Appeals in New York ruled in August. The appeals court upheld a lower court, which in turn partly reversed a ruling by a U.S. bankruptcy judge.

Margin Assets

The bankruptcy judge had ordered Barclays in 2011 to return $2 billion in margin assets to Giddens. At the same time, he ordered Giddens to give Barclays at least $1.1 billion, and possibly another $769 million. Each party appealed.

In 2012, U.S. District Judge Katherine Forrest in Manhattan told the brokerage to pay Barclays, saying the final sale documents showed the parties’ true intent.

Jonathan Schiller, who led the representation of Barclays in the case, said in a statement that the bank “fought hard” to secure about $8 billion of disputed assets.

“Today’s settlement brings that effort to a successful completion,” he said.

The brokerage liquidation is In re Lehman Brothers Inc., 08-01420; U.S. Bankruptcy Court, Southern District of New York (Manhattan)

(An earlier version of this story was corrected to remove an erroneous reference to customer accounts.)