Perpetual Trustees will send lawyers to the Federal Court this week to resist producing details of a December out-of-court settlement with a United States arm of the collapsed Lehman Brothers investment bank.
PERPETUAL Trustees will send lawyers to the Federal Court this week to resist producing details of a December out-of-court settlement with a United States arm of the collapsed Lehman Brothers investment bank.
The US company, Lehman Brothers Special Financing Inc, will also send its lawyers to protect an agreement with Perpetual that the terms of the settlement would remain confidential until May.
Lehman Brothers Australia liquidator Stephen Parbery wants the details for potential use in his defence to a class action by former clients that began on March 2.
The New York case and the Sydney class action both concern collateralised debt obligations marketed by Lehman Brothers Australia.
Mr Parbery, a partner of PPB Advisory, said in February that even if the class action proved that Lehman misled its clients and breached its fiduciary duty to them, the compensation payable by the Australian arm of the bank might be ''minimal'' because some of the CDOs had recovered in value in recent months and others had the potential to return investors their capital in full.
Perpetual is the trustee for 1000 Australian investors, mostly individuals, who invested $125 million in a series of CDOs called Mahogany notes.
The class action involves 72 local councils, churches and charities seeking $260 million to recover losses incurred on 39 series of CDOs.
The Mahogany notes and 12 of the class action series are in a special category because they were originated by Lehman Brothers Special Financing.
In the New York suit, Perpetual argued that a clause in the documentation for the Mahogany notes favourable to the investors was triggered by the collapse of Lehman Brothers Special Financing in September 2008.
If triggered, the clause gives investors immediate access to the collateral supporting the notes.
If it is not triggered, the originator has first access to the collateral in the event of credit defaults by companies linked to the notes by a credit default swap.
Justice Steven Rares will hear the confidentiality dispute on Thursday.
Frequently Asked Questions about this Article…
What is Perpetual Trustees doing about the Lehman settlement and why?
Perpetual Trustees will send lawyers to the Federal Court to resist producing details of a December out-of-court settlement with a US arm of Lehman Brothers. Perpetual says the settlement terms were agreed to be confidential until May and it is seeking to protect that agreement.
Who is Lehman Brothers Special Financing Inc and what is its role in the case?
Lehman Brothers Special Financing Inc is the United States arm of the collapsed Lehman Brothers investment bank. It will also send lawyers to the Federal Court to protect the confidentiality of its settlement with Perpetual.
Why does the Lehman Brothers Australia liquidator want the settlement details?
Stephen Parbery, the Lehman Brothers Australia liquidator and a partner at PPB Advisory, wants the settlement details because he believes they could be used in his defence in a class action by former clients that began on March 2.
What are the Mahogany notes and how many Australian investors are affected?
The Mahogany notes are a series of collateralised debt obligations (CDOs). Perpetual is the trustee for about 1,000 Australian investors, mostly individuals, who invested roughly $125 million in those Mahogany CDOs.
Who is involved in the class action against Lehman and how much are they seeking?
The class action involves 72 local councils, churches and charities seeking about $260 million to recover losses incurred on 39 series of CDOs marketed by Lehman Brothers Australia.
Why are the Mahogany notes and some CDO series treated differently in the litigation?
The Mahogany notes and 12 of the class action series were originated by Lehman Brothers Special Financing, which places them in a special category because that originator is a party in the related New York litigation and settlement.
What contractual clause is Perpetual relying on in the New York suit?
Perpetual argues a clause in the Mahogany note documentation was triggered by the collapse of Lehman Brothers Special Financing in September 2008. If triggered, the clause would give investors immediate access to the collateral supporting the notes; if not triggered, the originator has first access to that collateral in certain credit-default scenarios.
When and where will the confidentiality dispute over the settlement be heard?
Justice Steven Rares will hear the confidentiality dispute in the Federal Court on Thursday.
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