(Bloomberg News) Final details of the distribution of billions of dollars of assets as part of Barclays Plc's purchase of Lehman Brothers Holdings Inc.'s brokerage unit were never approved, the judge in the bankruptcy case said.
"Let me be clear about one thing, Mr. Boies," U.S. Bankruptcy Judge James Peck told Barclays' lawyer David Boies yesterday. "I never approved the clarification letter," one of about 12,000 documents filed in the case.
Peck had interrupted Boies as he began closing arguments in the $11 billion trial in Manhattan. The lawyer said the judge had no legal basis for reopening his own sale order because all details of the deal were known at the time. That included a so- called clarification letter allocating extra assets to Barclays.
Lehman, which accuses Barclays of making an $11 billion "windfall" when it bought the brokerage in the 2008 financial crisis, is trying to convince Peck that he has grounds for overturning his own order approving the sale. Peck didn't indicate what effect his statement would have on the details of the brokerage sale.
Peck's remarks may indicate he sees an "opening" to revise the deal more in Lehman's favor, said Stephen Lubben, a bankruptcy law professor at Seton Hall University School of Law in Newark, New Jersey.
"Peck is confirming that he never saw nor approved of the clarification letter," Lubben said. "Now, if he finds it material, Barclay's has a problem." Barclays may feel pressure to settle the case if they interpret Peck's remarks as favoring Lehman, Lubben said.
Kimberly Macleod, a Lehman spokeswoman, and Michael O'Looney, a Barclays spokesman, declined to comment.
Lehman rose as much as 4 cents, or 76 percent, to 9.35 cents, before closing yesterday at 7.5 cents, up 42 percent in over-the-counter trading. Lehman volume was more than 10 times the three-month average.
Lehman's $2.5 billion of 6.875 percent 10-year bonds due in May 2018 were unchanged at 23.25 cents on the dollar as of 3:15 p.m. yesterday in New York, according to Trace, the bond-pricing reporting system of the Financial Industry Regulatory Authority. Earlier the bond fell as much as 0.688 cents on the dollar. The bond has risen from 16 cents in October 2009.