Dhe Deutsche Bank has appealed a ruling by a UK court last year. The German financial institution is apparently hoping to get a little more out of so-called Enhanced Capital Advantaged Preferred Securities (ECAPS), a form of subordinated debt that Lehman had issued through one of its British subsidiaries. This is reported by the Bloomberg news agency, according to which the Bank Barclays and the hedge funds Farallon and CarVal are among the creditors. None of the creditors wanted to comment on the case.
The hearing in the London Court of Appeals is due to last until the end of the week. It is therefore about 500 million pounds, which should bring in the papers considered worthless after the bankruptcy. As recently as 2017, some of them were traded at 1.5 cents on the euro.
In 2008, some hedge funds and banks had secured some such papers, which have been the subject of a number of legal disputes since then. The dispute over the ECAPS is considered to be one of the last. The processing of the European Lehman part was far more successful than assumed at the time, according to Bloomberg. Creditors who took precedence over the ECAPS holders would have been completely redeemed and there would likely be money left.
Deutsche Bank versus Lehman Holding
Bankruptcy trustee PwC estimated earlier this year that between £ 280 million and £ 500 million could be distributed, including to subordinate creditors. This also caused the price of the ECAPS to rise, for which more than 20 percent of the nominal value had already been paid in mid-2020.
In a judgment, the London High Court had set the claim to 13.7 percent of the remaining liquidation proceeds. The rest is due to the parent company Lehman Brothers Holdings. The latter and the hedge funds King Street and Elliott are organized in the Wentworth joint venture and are bringing claims against the European subsidiary on the basis of loans granted by the parent company. King Street is also a large owner of ECAPS.
However, according to Bloomberg, Deutsche Bank is the largest creditor. Now it is a question of the ranking among the subordinate creditors. According to the court ruling, the ECAPS holders are entitled to approximately £ 38 million assuming a surplus of £ 280 million. If the appeal is successful, they could claim the full amount.
Potential success depends in part on a legal battle between Lehman’s European arm and American bond insurer Assured Guaranty, which negotiations are due to begin in November. Lehman Brothers International Europe is suing $ 500 million in damages for allegedly mispricing Assured Guaranty credit protection transactions.
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