“A lot of it goes to what is the value of the replacement trade,” he said.
Suing Bank
When the disagreements can’t be settled out of court, Lehman has sued. On April 17, one of its units sued the Federal Home Loan Bank of Cincinnati, demanding the bank pay it an additional $63.9 million related to 87 interest-rate swaps.
Municipalities and nonprofits typically issued floating- rate bonds and entered into a contract where they received a floating-rate that was meant to approximate the rate on their debt while paying a so-called synthetic fixed rate that was lower than the cost of borrowing with traditional bonds.
When Lehman filed for Chapter 11, many counterparties that had swaps and other derivatives with the bank ended their transactions. Depending on the terms, the client either owed Lehman money or was owed money on the date the contract was unwound.
The Buck Institute, about 30 miles (48 kilometers) north of San Francisco, entered into a swap with Lehman in December 2003 to manage interest-rate swings on about $56 million of bonds. Buck issued the debt to finance an 180,000-square-foot research complex designed by renowned architect I.M. Pei.
Stem Cells
Buck Institute scientists research and use stem-cell technology to detect, delay, prevent and treat diseases such as Alzheimer’s, Parkinson’s and Huntington’s.
One of Buck’s researchers, Xianmin Zeng, is leading a global charge to get a stem-cell treatment for Parkinson’s disease ready for clinical trials.
In October 2008, Buck wired a $2 million termination payment to Lehman with a detailed explanation of the method it used to determine the amount, according to a court filing and Buck’s financial statements.