Lehman Brothers and JPMorgan Chase close the deal over collateral claims

Lehman Brothers settles about $7.68 billion in collateral claims with JPMorgan Chase & Co concerning. According to the court documents, these claims were pending following Lehman's bankruptcy filing in 2008. 

Despite, the collateral posted by Lehman had a face value in the billions of dollars, it consisted of illiquid securities whose actual value was difficult to ascertain, as court documents show.

Under the settlement agreement, JPMorgan will cut the reset of its claims from about $7.68 billion to about $557 million after adjusting for Lehman's cash collateral. In turn, Lehman will have to make a one-time cash payment of about $557 million to JPMorgan. JPMorgan’s supposed to transfer the remaining illiquid collateral back to Lehman.

Initially, as of the documents from Bankruptcy Court of Southern District of New York, JPMorgan had provided the variety of financial services to Lehman's primary broker-dealer unit prior to the latter's bankruptcy filing in September 2008. In the summer of 2008, JPMorgan had requested Lehman Brothers to execute a guaranty dated August 26, 2008, and post collateral to cover that guaranty. Between September 9, and September 12, 2008, Lehman posted an estimated $8.57 billion in cash and money market funds as additional collateral security.

Lehman hopes the illiquid collateral, that is to be returned by JPMorgan, would rise in value over a period of time, the court paper shows.