Lehman alleges that AIG is using the bank's failure as an excuse not to make payments, which violates US bankruptcy law
Lehman Brothers Holdings has sued AIG for $9 million in payments, which according to the bank, is owed from credit default swap protection which it had bought from the insurer on companies including GM and Washington Mutual – reported Reuters.
Lehman alleges that AIG is using the bank’s failure as an excuse not to make payments, which violates US bankruptcy law. AIG had the option to terminate the CDSs, which used to insure against a borrower defaulting on its debt, when Lehman failed in September 2008.
According to Lehman, the company failed to do so in order to avoid paying Lehman the $50 million it would have been owed at the time. The insurer appears to be refusing to meet its obligations until the contracts mature or the value of the contracts swings in AIG’s favour.
Lehman bought protection from AIG on AbitibiBowater, Washington Mutual and General Motors Corporation, all of which have filed for bankruptcy.
The case is scheduled to be heard in the US Bankruptcy Court for the Southern District of New York on October 14, as quoted in Reuters.