Apr, 03
2017

HOUSTON, April 3, 2017 – Today, 14 institutional investors represented by Gibbs & Bruns LLP (“Institutional Investors”) announced they have reached an agreement with the Plan Administrator for Lehman Brothers Holdings Inc. and the other Debtors in the Lehman Bankruptcy Proceeding (the “Plan Administrator”) under which the Plan Administrator has made a binding offer (“Offer”) to the Trustees for 244 RMBS Trusts issued by Lehman (or into which Lehman contributed mortgages) to settle mortgage repurchase claims in respect of Covered Loans.  The Institutional Investors support the agreement and have asked the Trustees to accept it.  The Trusts included in the Offer are listed on Exhibit “A.”

Robert Madden, counsel for the Institutional Investors, calls this announcement, “an important capstone to our clients’ efforts to address the problems of ineligible mortgages in residential mortgage-backed securitizations.” “Fair and efficient resolutions like this one,” he added, “have been transformative for the market and for investors.”

The Trustees will have until June 1, 2017 to accept the Offer.  The Offer includes the following key terms:

1.         The allowed amount of the mortgage repurchase claims submitted under the existing loan review protocol in respect of Covered Loans will be determined by the Lehman Bankruptcy Court in an estimation proceeding to commence in October 2017;

2.         In the estimation proceeding, the Plan Administrator and the Trustees each will have the opportunity to present evidence to support their views as to the allowable value of the Covered Loan Claims submitted by the Trustees under the protocol that had been established by the Bankruptcy Court;

3.         Despite the evidence presented, the Plan Administrator has agreed to request that the Trusts’ claims on account of Covered Loans be allowed in the amount of $2.416 billion (the Institutional Investors previously negotiated a proposed settlement at that level and agree that a settlement at that level is fair and reasonable) and that if the Bankruptcy Court determines the claims in a range of $2.00 billion to $2.416 billion, to nevertheless allow the claim in the amount of $2.416 billion;

4.         In exchange for the Plan Administrator’s agreement to request a $2.416 billion claim in respect of Covered Loan Claims, rather than a lower claim, the Trustees will waive their right to appeal a Bankruptcy Court decision so long as the Bankruptcy Court determines the claim in an amount greater than $2.0 billion;

5.         The Plan Administrator has agreed to waive its right to appeal the Bankruptcy Court’s determination; and

6.         A release of all repurchase claims that have been or could have been asserted by the Trusts in respect of Covered Loans.

The Offer is available at a website created by the Trustees, which can be found at: http://www.lbhirmbssettlement.com/.

The Institutional Investors who are parties to the agreement are:

·         AEGON USA Investment Management, LLC
·         BlackRock Financial Management Inc.
·         Cascade Investment, L.L.C.
·         Federal Home Loan Bank of Atlanta
·         Goldman Sachs Asset Management, L.P.
·         Invesco Advisers, Inc.
·         Kore Advisors, L.P.
·         Metropolitan Life Insurance Company
·         Pacific Investment Management Company LLC
·         Sealink Designated Activity Company, through its investment manager Neuberger Berman Europe Limited
·         The TCW Group, Inc.
·         Thrivent Financial for Lutherans
·         Voya Investment Management LLC
·         Western Asset Management Company

The agreement is subject to acceptance of the Offer by the Trustees.  Pursuant to the agreement, the Institutional Investors have requested that the Trustees accept the Settlement.  The Institutional Investors have also agreed to use their reasonable best efforts to obtain court approval of the settlement, if the Trustees elect to accept the Offer and seek judicial findings from the Bankruptcy Court concerning their decision to do so.  Attorneys’ fees for the Institutional Investors’ counsel, Gibbs & Bruns, will be paid upon consummation of the settlement and final allowance of the Trusts’ claim.

FAQs

Q:        Who are the parties to the settlement?

A:        The Plan Administrator has made a binding Offer to the RMBS Trustees of all of the RMBS Trusts listed on Exhibit “A.”  The Trustees who have received the offer are:   U.S. Bank National Association, Law Debenture Trust Company of New York, Wilmington Trust Company, Wilmington Trust National Association, Deutsche Bank National Trust Company, in each case acting in their representative capacities as trustees, co-trustees, separate trustees and or successor trustees of the applicable Trusts.  The Offer is being made pursuant to an agreement between Lehman and the Institutional Investors.

Q:        What Trusts are involved in the proposed settlement?

A:        There are 244 Trusts involved in the settlement.  They are listed on Exhibit “A.”

Q:        What was the role of the 14 Institutional Investors?

A:        The Institutional Investors, through their Steering Committee and their counsel, led the settlement negotiations.  The Institutional Investors did not negotiate on behalf of the Trustees.  The Institutional Investors have requested that the Trustees enter into the settlement and will appear in court to support the settlement and the judicial findings called for by the proposed settlement.

Q:        Will the Institutional Investors benefit differently than other investors under the settlement?

A:        No, they will not.  Upon the Trustees’ acceptance of the proposed settlement, and the completion of the estimation proceeding called for by the proposed agreement, the allowed claim will be allocated by the Trustees’ expert among the RMBS Trusts based on a detailed allocation schedule prepared by an expert retained by the Trustees, based upon the Trustees’ loan file review and claim submission in the Lehman bankruptcy Proceeding.  The allocation schedule is attached to the proposed settlement agreement as Exhibit H.  The proposed settlement agreement is available at a website created by the Trustees, which can be found at: http://www.lbhirmbssettlement.com/.  Each RMBS Trust’s allocable share of the settlement payment will flow down its payment waterfall in accordance with the governing documents for that Trust.  The Institutional Investors will participate in the settlement, like every other investor, based on the terms of the payment waterfall.

Q:        Are individual investors’ securities claims affected by the settlement?

A:        No, they are not.  The settlement pertains only to the Trusts’ repurchase claims.  The Offer states specifically that:  “The releases and waivers in Article III do not include any direct individual claims for securities fraud or other alleged disclosure violations (“Disclosure Claims”) that an Investor may seek to assert based upon such Investor’s purchase or sale of Securities.”  The Plan Administrator has reserved the right to assert that any payment made or benefit conferred under the settlement constitutes an offset or credit against or a reduction in the gross amount of an Investor’s Disclosure Claim damages.  Note, also, however, the settlement agreement expressly provides that nothing in the agreement is intended to or shall be read to alter, modify, or amend any order of the Court, any provision in Lehman’s Plan, or provision of law concerning the assertion or timeliness of any Disclosure Claims or any other claims.

Q:      How will the Trustees assess whether to accept the Offer?

A:      The Trustees have until June 1, 2017 to conduct a reasonable investigation of the settlement and its terms.

The Trustees may conduct such diligence as they deem necessary to inform themselves concerning the Settlement, may solicit input from Investors, and may retain experts to assist them.

Q:        When and how will the settlement payment be distributed?

A:        Once the allowable amount of the claim is determined by the Bankruptcy Court and all required court approvals have become final, payments on account of the allowed claim will be made under Lehman’s Bankruptcy Court approved bankruptcy plan.  Distributions on account of the allowed claim will be made to the applicable Trustees, and then allocated to the Trusts pursuant to an allocation schedule attached to the proposed settlement agreement as Exhibit H.  The proposed settlement agreement is available at a website created by the Trustees, which can be found at: http://www.lbhirmbssettlement.com/.  The timing of payment is not certain, as it depends upon a number of factors including:  a) whether the Trustees accept the settlement, b) whether the Trustees elect to condition their acceptance on approval of certain judicial findings concerning their decision to accept the settlement, c) whether the judicial findings , if sought, are granted, d) when the estimation proceeding to set the amount of the allowed claim is concluded, e) whether the amount estimated and allowed is subject to appeal, and f) certain required REMIC determinations.

Q:        How will the settlement payment be allocated among the Trusts?

A:        The settlement agreement specifies that the total allowed claim awarded to the Trust will be allocated pursuant to the Trust-by-Trust percentages set out in the schedule attached to the proposed settlement agreement as Exhibit H.  The proposed settlement agreement is available at a website created by the Trustees, which can be found at: http://www.lbhirmbssettlement.com/.  The allocation schedule was prepared by an expert retained by the Trustees, based upon the Trustees’ loan file review and claim submission in the Lehman bankruptcy Proceeding.

Q:        How can interested investors learn more about the settlement?

A:        All investors have received or will receive a notice from the relevant Trustee(s) concerning the settlement terms.  Information is also available on a settlement-related website that has been created by the Trustees located at: http://www.lbhirmbssettlement.com/.

EXHIBIT A

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