Maybe NGF went too early in cutting a deal with Lehman - 160M of...

Maybe NGF went too early in cutting a deal with Lehman - 160M of debt and int is a real mountain ($97M+ 16% for 4 yrs)!!!

From the Wall Street Journal - 21 Sept 2010.

Lehman Suffers Setback in Derivatives Ruling
BNY Corporate Trustee Services Ltd. can appeal a Bankruptcy Court decision that originally went in favor of a Lehman Brothers Holdings Inc. unit.
The order from Judge Colleen McMahon of New York's Southern District Court, faxed to the parties Monday, is a potential game changer because Judge James Peck's earlier decision had helped to influence settlement negotiations worth billions of dollars between the Lehman Brothers unit, Lehman Brothers Special Financing Inc., and other trading partners in structured-finance deals. Now those counterparties may have more bargaining power. Mr. Peck didn't issue the appeal grant because he is a Bankruptcy Court judge.
Referring to the case in a July order, Mr. Peck said the case was "break[ing] new ground as to unsettled subject matter" and his decision would likely be "controversial." Because the matter is separately being argued in U.K. courts, where judges have sided with Lehman's counterparties, the U.S. development could bring about a resolution of the matter where there had previously been conflicting decisions.
The case centers on the terms of credit-derivatives contracts between Saphir Finance Public Limited Co., a special-purpose vehicle, and Lehman Brothers Special Financing before the investment bank filed for Chapter 11 bankruptcy protection in 2008. BNY acted as trustee and holder of the collateral securing the trade.
Notes were issued by the Saphir vehicle to noteholders, including Australia's Perpetual Trustee Co., and interest on the notes was funded by payments from the Lehman unit, guaranteed by Lehman's U.S. holding company.
Under the terms of the structured-finance transaction, known as a synthetic collateralized debt obligation, the unit's rights to certain payments preceded those of the noteholders, except in the case of the unit's default. Facing such a default, noteholders such as Perpetual had the right to receive payments ahead of the unit. The Lehman unit and the Lehman holding company filed for bankruptcy protection separately in 2008.
Despite agreeing to the contract terms at the outset of the trade, the Lehman unit objected to the provision that changed these payment priorities when it went under. It argued that the penalty of the flip clause shouldn't have been enforced because the firm was in a disadvantageous position, one that should have afforded it certain protections under the U.S. Bankruptcy Code. Mr. Peck agreed and decided that a motion against Lehman would have violated section 362(a) of that code, at the same acknowledging that it was "first such interpretation of the [relevant] language" in the code.
In Monday's order granting BNY's appeal, Judge McMahon of the District Court wrote: "LBSF's efforts to shield Judge Peck's unprecedented and�for LBSF�extremely favorable decision from review are, of course, not surprising. Indeed, LBSF does not deny that, since the decision was handed down, it has used it as leverage in settlement negotiations concerning billions of dollars worth of similar transactions. LBSF's desire to insulate Peck's ruling from appellate scrutiny only further demonstrates the need for immediate review."
A spokesman for BNY said the firm was pleased with the court's decision. A spokeswoman for Lehman wasn't reachable for comment, and Perpetual Trustee declined to comment.
Bankruptcy courts in the U.S. and the U.K. have been addressing the clause issue because English law governing the collateral documents and units of Lehman on both sides of the Atlantic were involved in the deal.
Perpetual Trustee filed an action against BNY in the U.K. High Court of Justice on May 13, 2009, seeking the collateral that is being held by BNY. The High Court ruled in favor of Perpetual, but the Lehman unit was given leave to appeal that decision, and a hearing is scheduled for March.
Ms. McMahon has moved for an expedited schedule for the Saphir case. That will be kicked off at a conference between BNY and the Lehman unit on Oct. 1.