Pending court approval, the deal settlement agreement with the French bank will allow it to recover $445 million for Lehman Brothers Special Financing. Lehman and SocGen were fighting over the timing of termination of two credit-default swaps agreements in 2008, shortly after Lehman Brothers filed for the largest U.S. bankruptcy ever. Says The Journal:
Under the swap agreements that Lehman, through a subsidiary, struck with the investment vehicles, Lehman purchased credit protection from the vehicles that entitled the investment bank to payments from Libra and Vela if the mortgage-backed securities they invested in experienced losses, the court documents said.
Société Générale also struck swap agreements with Libra and Vela. Those deals put the French bank on the hook for certain payment obligations the investment vehicles owed Lehman in the event that they weren’t able to meet those obligations, the court documents said.
Lehman says that Libra and Vela ended the credit-default swap agreements too early, thus avoiding having to pay Lehman. If the court approves the settlement, Lehman gets nearly half a billion dollars — money it and its affiliates can promptly use to pay their creditors. Ah, sweet victory.