x Abu Dhabi, UAESunday 23 July 2017

ADIA files claim against Lehman

The Abu Dhabi Investment Authority is among a group of international creditors to file claims against the collapsed US investment bank Lehman Brothers.

The Abu Dhabi Investment Authority (ADIA) is among a group of international creditors to file claims against the collapsed US investment bank Lehman Brothers. ADIA is seeking payments from US$610 million (Dh2.24 billion) it held in commercial paper purchased in the weeks before Lehman's failure. The debt, which yielded around 2.9 per cent, was due to mature just weeks after Lehman's bankruptcy filing.

Filing claims alongside Abu Dhabi's sovereign wealth fund were major financial institutions including the UK's Barclays Bank and US bank Morgan Stanley, according to the claims administrator's website. Investors from across the world were hit when Lehman filed the largest US bankruptcy in September last year after the subprime mortgage market collapse left what was the fourth-largest investment bank unable to pay its debts.

Lehman creditors worldwide might file more than $1 trillion in claims and will probably have trouble validating them, said Harvey Miller, Lehman's lead bankruptcy lawyer. The company has listed assets of $639bn. In one of its claims, Barclays is demanding as much as $1.34bn in respect of guarantees given under derivatives contracts; Morgan Stanley's largest claim for $1bn is also connected to Lehman's role as counterparty on trades with the investment bank.

Other banks making claims on derivative contracts include Lloyds Banking Group's unit, Bank of Scotland, and the Swiss bank UBS. Pension funds including the New York State Teachers' Retirement plan also submitted hefty claims. ADIA has previously been harmed by its stake in the troubled US banking giant Citigroup. In 2007, ADIA paid $7.5bn for a 4.9 per cent stake in Citigroup and has suffered huge paper losses on its investment. An Abu Dhabi Government official was quoted in March this year as saying ADIA was assessing its investment in the bank.

Government-backed investment vehicles in the Gulf have been hard hit as their portfolios have suffered because of the global financial crisis. The Gulf's sovereign wealth funds had shrunk by about 8 per cent over the past year as their investment portfolios suffered losses and contributions from oil revenues declined, according to a study published in January by economists at the Council on Foreign Relations, a think tank based in New York.

* with agencies tarnold@thenational.ae