Barclays PLC didn’t make a $5 billion “windfall” on a $45 billion loan to bankrupt Lehman Brothers Holdings Inc. when it bought Lehman’s brokerage business, an accounting specialist for the U.K. bank testified.
The loan collateral was worth $45.5 billion, almost equal to the sum lent, Gary Romain, Barclays Capital’s head of technical accounting, told U.S. Bankruptcy Judge James Peck on Thursday in Manhattan. Lehman has said the value of the collateral approached $50 billion.
Romain was called to testify in a trial to determine whether London-based Barclays should pay Lehman as much as $11 billion for making an allegedly undisclosed windfall on the September 2008 brokerage purchase.
Barclays reported a $4 billion gain by writing up goodwill and derivatives holdings, Romain said. About $2 billion of the gain came from an assessment of revenue that might be generated from Lehman’s customers over seven years, plus software and fixtures, Romain said. The rest was from Lehman trading positions that were impossible to value during the 2008 financial crisis, he said.
The trial before Peck, who approved the original deal almost two years ago, pits the U.K.’s third-biggest bank against Lehman, which wants money from Barclays to pay creditors. Peck said when he approved the sale, less than a week after Lehman filed for bankruptcy, that it would help stabilize financial markets left in disarray after Lehman’s failure.
A recovery in the case would help Lehman creditors, who may recoup only 15 cents to 44 cents on the dollar, Lehman has said, and hurt Barclays, which made 2.4 billion pounds ($3.7 billion) in the first half.
The cases are In re Lehman Brothers Holdings Inc., 08- 13555, and Giddens v. Barclays Capital Inc., 09-01732, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
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