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Bankruptcy court enters order on settlement of Lehman derivative contracts

 

18 December 2008

The United States Bankruptcy Court for the Southern District of New York entered an order that establishes procedures for Lehman Brothers Holdings Inc. and its affiliated debtors in chapter 11 proceedings.  

On December 16, 2008, the United States Bankruptcy Court for the Southern District of New York (the Bankruptcy Court) held a hearing and subsequently entered an order (the Order) that

  • establishes procedures for Lehman Brothers Holdings Inc. and its affiliated debtors in chapter 11 proceedings (Lehman) to assume and assign executory derivative contracts that have not yet been terminated and
  • permits Lehman to enter into settlement agreements with counterparties under terminated derivative contracts without further court approval.

The procedures absolve Lehman of the requirement to seek court approval for each proposed assumption and assignment or settlement.

The Order was entered pursuant to Lehman's motion filed on November 13, 2008, but the final Order included certain clarifications and substantive changes to Lehman's proposed order based on objections received from interested parties. Lehman noted that only 30,000 derivative contracts out of an original 930,000 remain open, down from close to 200,000 a few weeks ago. Certain objections remain unresolved and were adjourned until January 14, until which time Lehman will not seek to assume and assign or settle the objecting parties' derivative contracts.

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