London: Barclays shares rose after a US federal judge ruled the British bank’s 2008 transaction to buy much of the US operations of failed Wall Street firm Lehman Brothers was a fair deal.
Barclays shares were up by about 1.5% at 0815 GMT on Wednesday, making the stock the top gainer on Britain’s benchmark FTSE 100 index, which was down by around 0.5%.
Barclays also outperformed a 0.4% gain in the broader European bank sector.
“This is a good decision for Barclays,” Seymour Pierce analyst Bruce Packard wrote in a research note. Seymour Pierce maintained a “hold” rating on Barclays shares.
Packard said that a ruling against Barclays could have resulted in Barclays making payments to the Lehman side, thereby affecting the British bank’s core Tier 1 capital ratio.
US bankruptcy judge James Peck ruled that Lehman Brothers Holdings Inc’s hurried sale of much of its US operations to Barclays at the height of the credit crisis was fair, and that Lehman’s bankruptcy estate is not entitled to recover an $11 billion “windfall”.
The ruling followed a trial in which Lehman had argued that Barclays had unfairly got a “sweetheart deal” in acquiring its US investment banking and brokerage operations.
Lehman had agreed to sell that business for about $1.85 billion on 20 September, 2008, just five days after the company’s Chapter 11 filing became what many consider the seminal event of the global financial crisis.
Peck’s ruling is a setback for Lehman, which last month projected it would have $60.1 billion to pay out to creditors, who believe they are owed six times that amount.
Lehman has also sued other banks including Bank of America Corp, Canadian Imperial Bank of Commerce and JPMorgan Chase & Co to recover assets for creditors.