The long-drawn legal battle between Barclays PLC BCS and Lehman Brothers Inc. has finally come to an end. Judge Shelley C. Chapman of the U.S. Bankruptcy Court in Manhattan has approved the settlement, under which Lehman will be paying $1.28 billion to Barclays. The judge stated the deal as “fair and equitable.”
The settlement was announced earlier this month. Moreover, both parties have agreed to drop current as well as prospective charges against each other.
The long-running dispute regarding Lehman’s margin accounts arose when Barclays had purchased the former’s brokerage unit in 2008. While Barclays claimed to have purchased the concerned accounts as part of the transaction, along with other brokered assets from Lehman; the latter argued that such accounts were cash, and hence, part of the company’s total estate.
When the deal was announced earlier in June, James W. Giddens, the trustee in charge of unwinding Lehman’s brokerage unit, had stated that it would free up cash worth roughly $580 million for payment to Lehman’s creditors, as the company had initially maintained a litigation reserve of roughly $1.87 billion.
For Barclays, the deal would lead to a pre-tax gain of $750 million in its second-quarter results.
Notably, Barclays and Lehman agreed that the total payment is $80 million short of what Giddens would have paid, had the settlement not taken place. Also, nearly $255 million related to exchange-traded derivatives is expected from third parties.
Apart from financial impact, the deal also removed a legal overhang for both the companies.
Currently, Barclays carries a Zacks Rank #3 (Hold). Better-ranked foreign banks include BBVA Banco Francés S.A. BFR, UBS Group AG UBS and National Bank of Canada NTIOF. All these stocks sport a Zacks Rank #1 (Strong Buy).
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