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Deutsche Bank's motion

Deutsche Bank's motion

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Published by: DealBook on Oct 18, 2011
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07/10/2013

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A/74529169.1
 Joshua Dorchak 
BINGHAM MCCUTCHEN LLP
 399 Park Avenue New York, New York 10022212.705.7000
 Attorneys for Deutsche Bank AG
 
Objection Deadline: October 12, 2011 at 4 p.m.Reply Deadline: October 17, 2011 at 12 p.m.Hearing Date: October 19, 2011 at 10 a.m.
UNITED STATES BANKRUPTCY COURTSOUTHERN DISTRICT OF NEW YORK 
In reLEHMAN BROTHERS HOLDINGS INC.,
et al.
,Debtors.Chapter 11Case No. 08-13555 (JMP)Jointly Administered
MOTION OF DEUTSCHE BANK AG PURSUANT TO SECTION 105(A)AND RULE 3013 TO ENFORCE SETTLEMENT APPROVAL ORDER AND TO CORRECT MISCLASSIFICATION OF CLAIMS
Deutsche Bank AG (“Deutsche Bank”), through its undersigned attorneys, hereby movesthis Court, pursuant to Section 105(a) of the Bankruptcy Code and Rule 3013 of the FederalRules of Bankruptcy Procedure, to enforce this Court’s January 14, 2010 Order (the “SettlementApproval Order”) approving a certain settlement agreement (the “Settlement Agreement”) between Lehman Brothers Holdings Inc. (“LBHI”), Lehman Commercial Paper Inc. (“LCPI”and, with LBHI, the “Settling Debtors”), Lehman ALI, Inc., and Dr. Michael C. Frege, as theInsolvency Administrator (the “Administrator”) for Lehman Brothers Bankhaus AG(“Bankhaus”), by entering an Order that classifies the “general unsecured claims” allowed infavor of Bankhaus against LCPI and LBHI by the Settlement Order and the SettlementAgreement as General Unsecured Claims (LCPI Class 4A and LBHI Class 7) under the ThirdAmended Joint Chapter 11 Plan and as generic, general unsecured claims under any other chapter 11 plan that may be confirmed in this case.
 
 
A/74529169.1
 2
PRELIMINARY STATEMENT
1.
 
After lengthy and complex negotiations, the Settling Debtors and theAdministrator executed the Settlement Agreement, which, among other things, expressly provided that the Administrator shall have (i) “an allowed and accepted non-priority unsecuredclaim in the amount of $1,015,500,000 against LCPI” (the “LCPI Claim,” later assigned Claim No. 59006) and (ii) “an allowed and accepted unsecured claim as a creditor against LBHI . . . inan aggregate amount equal to $1,380,900,000,” subject to certain potential reductions (the“LBHI Claim,” later assigned Claim No. 58233) (the LCPI Claim and the LBHI Claim together,the “Claims”). The Settlement Agreement further expressly provides:For the avoidance of doubt, except as otherwise provided in thisSection 12, [the Claims] shall be treated in a like manner to that of other general unsecured claims against LBHI and LCPI andreceive treatment and distribution on account of such claims equalto that of other general unsecured claims against LBHI and LCPI,and shall not be subject to further defenses . . . .”2.
 
The effectiveness of the Settlement Agreement was conditioned upon this Court’sapproval in this case and in Bankhaus’s Chapter 15 case. In their motions seeking that approval,the Settling Debtors and the Administrator described the Claims precisely as they are describedabove. At the hearing on the motions, the Settling Debtors and the Administrator and/or their counsel described the Claims as “general unsecured claims.” Neither the Settling Debtors nor the Administrator ever stated, or even implied, that the Claims were to be treated like affiliate or guaranty claims in any Chapter 11 plan. This Court granted both motions, approved theSettlement Agreement, and on January 14, 2010, entered the Settlement Approval Order, whichrepeats verbatim the descriptions of the Claims quoted above.3.
 
In July 2010, Deutsche Bank acquired the Claims from the Administrator, whoconfirmed that his understanding of the mutual intent of the parties to the Settlement Agreement
 
 
A/74529169.1
 3was that the Claims were to be classified as general unsecured claims, not as affiliate claims or other claims that were impaired in any way.4.
 
For purposes of the first and second versions of the Chapter 11 plan proposed bythe Debtors in this case (in March 2010 and January 2011), both of the Claims appear to becorrectly classified as “General Unsecured Claims” against LCPI and LBHI. In the DisclosureStatement for the current plan, however, the LCPI Claim is misclassified as an “Affiliate Claimother than those of LBHI and Participating Subsidiary Debtors” (LCPI Class 5C) against LCPI,and the LBHI Claim is misclassified as a “Senior Affiliate Guarantee Claim” (LBHI Class 4B)against LBHI. The recovery rates for claims in these classes are substantially lower than for General Unsecured Claims against these Debtors.5.
 
At this point, while reserving its rights on the subject, Deutsche Bank need notaccuse the Debtors of gerrymandering, robbing Peter to settle with Paul, or the like. Whatever the Debtors’ motives in removing the Claims from their proper classes (where they were in the prior versions of the plan), the current classification is wrong, and must be corrected.6.
 
Each of the Claims is in a face amount of over $1 billion. Even in this case, a billion-dollar-plus claim is significant, including for purposes of voting on a plan. Indeed, theLCPI Claim, properly classified, represents almost one third of the total estimated allowedgeneral unsecured claims against LCPI. For these reasons, it is crucial -- not only for DeutscheBank but for all creditors of LCPI and LBHI -- that this Court restore the Claims to their proper classes in advance of the voting deadline, rather than risk a post-certification or post-confirmation ruling that the Claims were voted in the wrong classes.7.
 
Accordingly, Deutsche Bank respectfully requests that this Court, under Section105(a) and Rule 3013, enforce the plain terms of the Settlement Approval Order and the

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