Judge Shrugs Shoulders At Hedge Funds, Says 'Whaddyagondoboutit'

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Baupost Group, Paulson & Co. and Cargill's hedge fund unit think it's awfully fishy that the corpse of Lehman Brothers is so eager to sell almost $3 billion in bankruptcy claims to Elliott Management and King Street Capital Management for a little over $1 billion. Especially since CarVal would like to pay almost $1.5 billion for the same claim.

U.S. Bankruptcy Judge James Peck thinks it's all a little strange, too. But, to use the parlance of our times, tough shit.

"I have no factual basis to that there is anything about this transaction that is truly suspect," Judge Peck told the assembled lawyers and onlookers in a Manhattan courtroom. "No facts have been presented, only suspicions…."

"Inquiring minds want to know, but so what?" said Judge Peck in response to a protest about the deal's opacity from one funds' lawyer.

Lehman's Chapter 11 plan delegated decision-making authority to the reorganized Lehman's new board, which is required to maximize value for creditors. The judge said he was loath to set a precedent where big hedge funds could interfere with the business decisions of a reorganized company's board.

"I'm not prepared today to create a precedent that is unwise," he said.

Judge Clears Way for Elliott, King Street Purchase of Lehman Claims [Dow Jones via NASDAQ]

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