Add Category
A representative for Lehman declined to comment.
Credit Suisse is the last holdout among Lehman's big derivatives counterparties that claimed the failed bank owed them money. Most of them settled long ago, and the only bank that took its case to trial, Citigroup, ended up settling for a fraction of what it sought. A trial over Credit Suisse's claim has been expected in the fall.
Loading
Credit Suisse and Lehman have yet to finalise a deal and the potential settlement could still fall apart, the person said, asking not to be identified because the discussions are private.
Around 2011, Credit Suisse began selling off chunks of the claim to hedge funds. The transactions gave the bank cash during a difficult period, while letting it forge ahead with a legal battle for the full amount it said it was owed. At the time, Credit Suisse was under pressure from regulators to shore up capital.
But the trade also gave Credit Suisse certain responsibilities. While terms of each trade varied, some of them meant that if the claim is only partially allowed, investors get back what they paid upfront, plus interest, on the portion that is not allowed, and get distributions from the estate on the rest.
Wall Street crumbled, and the repercussions can still be felt today. At least some of them.
Photo: APAssuming a claim of $US385 million is allowed, the impact to Credit Suisse would be a loss of $US70 million or less, according to another person familiar with the situation, who also spoke on condition of anonymity.
Since the claims were sold, Lehman and Credit Suisse have been locked in disputes. In a 2013 lawsuit, Lehman sued Credit Suisse, accusing it of having "inflated" its claim by over $US1 billion ($1.26 billion), and saying that it may actually owe Lehman money. More recently, the two have fought over document discovery and subpoenas, driving up Credit Suisse's legal costs. As time has ticked on, Credit Suisse's interest costs tied to the hedge fund participation have also grown.
The resolution will be a boon for Lehman's creditors. In December, its estate estimated the Credit Suisse resolution at $US573 million.
For Credit Suisse, the claim resides within the bank's strategic resolution unit, where it deals with matters that are already winding down. The bank has said it wants to close the unit by the end of 2018, and a resolution doesn't change Credit Suisse's guidance for the unit.
Bloomberg