Lehman Brothers' European unit loses bid to recoup $485 mln from bond insurer

Assured Guaranty

09/03/2023 16:36

By Jonathan Stempel
       NEW YORK, March 9 (Reuters) - A New York judge rejected
a bid by the former Lehman Brothers' bankrupt European unit to
claw back $485 million from bond insurer Assured Guaranty Ltd
 AGO.N  over transactions that were canceled amid the global
financial crisis.
    In a decision on Wednesday, Justice Melissa Crane of a New
York state court in Manhattan said Assured's AG Financial
Products unit instead deserved to recover about $20 million from
Lehman Brothers International (Europe).
    The case stemmed from Assured's July 2009 termination of 28
credit default swaps on which Lehman had bought credit
protection.
    Lehman and Assured disagreed on how to calculate the "loss"
from the terminations.
    Crane said Lehman's calculation, based on hypothetical
market prices estimated by its experts, was not reasonable
because the financial crisis has "so disrupted" markets that
accurate prices did not exist.
    "By putting all its eggs in the market price basket, LBIE
has failed to show both that Assured's valuation was
unreasonable, and that its own valuation was reasonable," the
judge wrote. "Meanwhile, Assured's valuation was reasonable and
calculated in good faith."
    Crane ruled after a five-week nonjury trial held in late
2021.
    Lehman had sought $1.4 billion when it sued Bermuda-based
Assured in November 2011. Some claims were dismissed before
trial.
    Lawyers for Lehman did not immediately respond to requests
for comment on Thursday. Assured's lawyers in a statement called
the decision a "significant victory."
    The Sept. 15, 2008 bankruptcy of Lehman Brothers Holdings
Inc - once Wall Street's fourth-largest investment bank - was
one of the major triggers of that year's financial crisis.
Lehman's bankruptcy remains by far the largest in U.S. history.
    The case is Lehman Brothers International (Europe) v. AG
Financial Products Inc, New York State Supreme Court, New York
County, No. 653284/2011.

 (Reporting by Jonathan Stempel in New York; Editing by Hugh
Lawson)
 ((jon.stempel@thomsonreuters.com; +1 646 223 6317; Reuters
Messaging: jon.stempel.thomsonreuters.com@reuters.net))