Wednesday, May 15, 2013

Lehman Bros. Seek Bigger Payments From Nonprofits

A year after exiting bankruptcy, Lehman Brothers Holding Inc. is back and is demanding larger exit payments from a host of nonprofits.

Lehman Bros. is not a name that brings back fond memories for most people. The financial institution's bankruptcy in Sept. 2008 was one of the major causes of the financial collapse that ravaged the economy.

According to a report in Bloomberg, the managers of Lehman's estate feel they were shortchanged by some nonprofits that made exit payments on derivatives that crashed after the bank filed for Chapter 11 bankruptcy, forcing it to sell its assets.

One of these organizations is Buck Institute for Research on Aging in Novato, Calif., which paid Lehman $2 million in Oct. 2008 to cancel a contract with the bank. Lehman has now come back to the organization and demanded $12.1 million more in addition to $4.7 million in interest. These funds are more than half of what the nonprofit spent o Alzheimer's, Parkinson's, and other diseases last year according to its most recent financial statement.

Mary McEachron, Buck’s chief administrative officer and general counsel, declined to comment on the situation to Bloomberg, saying only that the matter has not yet been resolved.

One other organization targeted by Lehman Bros. is a 5,000-student liberal arts college in Boston called Simmons College. The school paid Lehman $5.5 million in Jan. 2009 to exit from three interest rate swaps. In its June 30, 2012 financial statement, Simmons stated it held back $800,000 of that payment for out-of-pocket expenses. This didn't set well with Lehman, which now wants to enter a settlement through mediation with the college.

Lehman exited the bankruptcy process in March 2012 and has since liquidated about $46.2 million in assets. The bank needs $65 million more to repay its creditors by 2016.

You can read the full story in Bloomberg.

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