Korea Investment & Securities Versus Lehman Brothers International

 

 

Just today, the attempts by Korea Investment & Securities (KIS) to accrue payment from Lehman Brothers International vis-à-vis the company's purchase of credit-linked notes (CLN’s) which are securities that have embedded credit default swaps enabling the issuer to transfer a credit risk to credit investors, four and a half years ago, were dismissed.  A few weeks ago the court dismissed TrueFriend’s claim (a KIS assignee) against Lehman Brothers International Europe (LBIE) which tried to recover $1314 million in loss on these CLN’s from November 2006.

 

This particular case is KIS’s purchase of CLNs from Lehman Brothers Treasure Co. a few years ago.  Some months later TrueFriend was set up by KIS, which it used to transfer/sell the CLN to.  A year and a half later following Lehman Brothers’ bankruptcy, TrueFriend no longer received any more payments, claiming LBIE to be the “de facto issuer,” not the LBTC.

 

Today, Mike Jervis (PriceWaterhouseCoopers partner in London) said, “The administrators welcome the court’s judgment, which will now enable them to continue with the orderly wind-down of LBIE and return of assets to creditors in a timely fashion.”

 

There is some talk that KIS will appeal the decision but Jarvis remains hopeful for KIS as the CLN “remains a valid claim in bankruptcy against LBTC and LBHI.