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Perpetual set to protect Lehman settlement detail

The Age

Monday March 21, 2011


PERPETUAL Trustees will send lawyers to the Federal Court this week to resist producing details of a December out-of-court settlement with a United States arm of the collapsed Lehman Brothers investment bank.The US company, Lehman Brothers Special Financing Inc, will also send its lawyers to protect an agreement with Perpetual that the terms of the settlement would remain confidential until May.Lehman Brothers Australia liquidator Stephen Parbery wants the details for potential use in his defence to a class action by former clients that began on March 2.The New York case and the Sydney class action both concern collateralised debt obligations marketed by Lehman Brothers Australia.Mr Parbery, a partner of PPB Advisory, said in February that even if the class action proved that Lehman misled its clients and breached its fiduciary duty to them, the compensation payable by the Australian arm of the bank might be "minimal" because some of the CDOs had recovered in value in recent months and others had the potential to return investors their capital in full.Perpetual is the trustee for 1000 Australian investors, mostly individuals, who invested $125 million in a series of CDOs called Mahogany notes.The class action involves 72 local councils, churches and charities seeking $260 million to recover losses incurred on 39 series of CDOs.The Mahogany notes and 12 of the class action series are in a special category because they were originated by Lehman Brothers Special Financing.In the New York suit, Perpetual argued that a clause in the documentation for the Mahogany notes favourable to the investors was triggered by the collapse of Lehman Brothers Special Financing in September 2008.If triggered, the clause gives investors immediate access to the collateral supporting the notes.If it is not triggered, the originator has first access to the collateral in the event of credit defaults by companies linked to the notes by a credit default swap.Justice Steven Rares will hear the confidentiality dispute on Thursday.

© 2011 The Age

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