Barclays wins dispute over assets from Lehman acquisition

UK lender Barclays won a significant legal victory in the US last night in its protracted fight over billions of dollars of disputed assets from its 2008 acquisition of Lehman Brothers.

A federal court said the lender could, in fact, keep the $3.5 billion in cash that was supporting Lehman Brothers derivatives positions, rather than handing the money over to the Lehman bankruptcy trustee, as ruled by a lower court last year. Barclays also would not have to pay $280 million in interest.

The two sides have locked horns over which assets were meant for inclusion with the acquisition, after Barclays bought most of Lehman Brothers from the bankruptcy trustee in the week following the collapse of the investment bank. Since the deal was done hastily, under circumstances that did not allow details to be worked out properly, during the worst week of the credit crisis, some documents were ambiguous or contradictory, the US District Court in Manhattan was told.

However, the lower court had ruled wrongly that there was doubt about the billions held in margin accounts. The paperwork pertaining to that part was "consistent and unambiguous: the margin assets were sold to Barclays", judge Katherine Forrest said in her ruling.

"This is not a situation where one believes he or she is buying a milking cow but gets a bull," she added.

According to Barclays, it was too early to quantify the effect of the ruling on its earnings, which had accounted for some of the disputed assets but not all, and there would likely to be a further round of court appeals.