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Proposed Lehman Settlement and the possible end of the expensive and failed Court ordered protocol

These documents recently appeared on the RMBS Trustees’ website concerning the LBHI Debtor’s Settlement Offer

A group of 14 institutional investors have submitted to the RMBS Trustees a settlement offer from the LBHI Debtors in the form of an RMBS Trust Settlement Agreement. If you care about any of these 244 deals, then you need to read these documents. The deals included are listed in the attached Excel spreadsheet.

Documents / Files attached

  • Institutional Investors Letter drafted by Robert J. Madden of Gibbs & Bruns to Counsel representing the Trustees asking each of the Trustees to accept the settlement - dated 3/17/2017

“Our clients have advocated settlement in this matter for some time, in no small part because of the significant expense that has been imposed on the Trusts by virtue of the Court ordered Protocol. Though those earlier efforts did not lead to a settlement the Trustees were able to accept, this offer is one the Trustees certainly should accept. It virtually ensures the Trusts claims will be allowed in an amount no less than $2.416 billion, because Lehman has agreed to seek estimation at that amount. In addition, while setting a functional floor on the recovery, the offer establishes no ceiling; instead, the Trustees are free to put on whatever proof they wish, to advocate for an increased estimation if they possess evidence they believe warrants it. And, finally, by making the estimation final as to both the Trusts and Lehman, it ends both the hemorrhage of dollars caused by the protocol and eliminates the risk--through elimination of any appeals--that this hemorrhage of funds will resume. In short, there is no reasonable basis on which the Trustees could or should refuse this guarantee of a certain recovery of more than a $1 billion in cash, with the opportunity to obtain more.”

  • Notice given by the Trustees regarding receipt of a Settlement Offer - dated 3/20/2017

“In order to bind any covered RMBS Trust or related Certificateholders, the proposed settlement agreement must be accepted on a final basis, if at all, on or before June 1, 2017.“

  • RMBS Trust Settlement Agreement - modified 3/17/2017

  1. Definitions

  2. Settlement Process

  3. Settlement Terms including the Estimation Proceeding

  4. Claims Not Released

  5. Release of Unknown Claims

  6. Miscellaneous Provisions

Plus Exhibits

A – 244 Trusts

B – 16 Terminated Trusts

C – Subsidiaries and Affiliates

D – Institutional Investor Letter

E – The Institutional Investor Statement

“The Institutional Investors have previously agreed that a settlement of the Covered Loan Claims for an allowed Class 7 General Unsecured Claim of $2.416 billion was fair and reasonable, and have supported a settlement of the claims at that amount. The Institutional Investors continue to believe, today, that a settlement at that amount is fair and reasonable. Therefore, the Institutional Investors support Lehman’s request that the Bankruptcy Court estimate the Claims so long as the amount estimated is not below an allowed Class 7 General Unsecured Claim of $2.416 billion."

F – Trustee Findings

G – Claims and Defenses to be tried

H – Allocation Percentages

I – Debtors’ Findings

  • Allocation Percentages from Exhibit H in Excel

We converted the PDF into Excel, added Cumulative Loss and Payout/Cumulative Loss, and filters on all the columns. You can see just how the settlement will be distributed among the deals. Some deals do a lot better than others.

Contact us at 203-276-0672 to become a client and access all reports and attachments.

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