Barclays wins suit against Lehman Brothers

Lehman Brothers - Another Setback

Lehman Brothers – Another Setback

A New York judge has ruled that Barclays’ takeover of much of Lehman Brothers operations in the US was flawed, but fair.

Barclay’s was being sued by Lehman Brothers for $11 billion (£6.8 billion) allegedly getting preferential treatment.

The Lehman Brothers US operations were acquired by Barclays in a hastily arranged sale in September 2008, at the peak of the financial crisis.

The Judge said the takeover was ‘adequate’ although the process followed was ‘imperfect’ given the circumstances.

The US giant had agreed to sell its investment banking and brokerage arm for $1.85 billion five days after it had filed for bankruptcy under chapter 11 protection clauses.

In a way, the failure of Lehman Brothers had triggered the global financial crisis and the first major bank in the world that was allowed to fail.

The bankruptcy estate of Lehman had hoped to extract $11 billion in windfall gains.

“The sale process may have been imperfect, but it was still adequate under the exceptional circumstances of Lehman Week”, said US bankruptcy judge James Peck.

Judge Peck said there was an “undeniably correct” opinion that the sale “mitigated systemic risk” and averted “an even greater economic calamity”.

The deal was hailed by many as key to keeping the international banking system alive.

The Judge said the sale had avoided “a potentially disastrous piecemeal liquidation” and saved thousands of jobs in the financial industry.

Lehman is suing other banks including JP Morgan Chase and Bank of America to recover assets to pay off creditors.

Barclays said it was happy that the US judge had agreed to its argument that it acted in good faith.

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