By Sakthi Prasad
Nov 18 (Reuters) - Citigroup Inc has agreed to pay $360
million to the brokerage estate of Lehman Brothers to resolve a
dispute over $1 billion in collateral that the investment bank
was forced to post in the days leading up to its bankruptcy in
2008.
According to a settlement reached on Friday with the trustee
liquidating Lehman Brothers's U.S. b rokerage unit, Citigroup
will also relinquish its claim to $75 million that was
contingently paid to the estate at the beginning of the
liquidation, court documents showed.
The trustee, James Giddens, filed the claim against
Citigroup and its subsidiaries early last year, arguing that the
$1 billion was obtained under coercion and that the amount
should be part of a general asset pool to be divided among
creditors in accordance with bankruptcy law.
Citigroup had countered the trustee's claims saying that it
is entitled to keep the $1 billion under the Bankruptcy Code's
"safe harbor" provisions, which shield certain financial
transactions from being included in the creditors' asset pool.
"For the benefit of customers and other creditors, we
continue to resolve disputes and marshal assets for the estate,
and this agreement accomplishes both," Giddens said in a
statement.
In a New York court filing, Giddens said that the protracted
litigation over the collateral dispute, along with associated
legal costs, would not be in the best interests of the Lehman
estate. Lehman's agreement with Citigroup is subject to court
approval.
Lehman emerged from bankruptcy in March, and has paid out or
plans to pay out $33 billion of an expected $65 billion to
creditors, recovering an average of 21 cents on the dollar. The
company is also being wound down.
In October, the U.S. brokerage unit and a European unit of
the former Lehman Brothers Holdings Inc said they settled
litigation over $38 billion of asset claims, a major step toward
customers and creditors recovering money.
The cases are In re: Lehman Brothers Inc, U.S. Bankruptcy
Court, Southern District of New York, No. 08-01420; and In re:
Lehman Brothers Holdings Inc in the same court, No. 08-13555.
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