General Update - Citigroup and LBIE reach settlement on $2.5bn of assets held in custody - 29/06/2011

Citigroup and PwC, the administrators of Lehman Brothers International (Europe) (in administration) ('LBIE'), have reached a settlement on assets, currently valued at over $2.5bn, which had been held for LBIE by Citigroup's custody businesses in a number of countries.

Under the terms of the settlement, Citigroup will immediately begin the process of transferring LBIE's custody assets, and LBIE will pay Citigroup custodian fees to reflect the complexity of the Lehman estate and the custody positions. Both parties will release each other in totality from all other claims or liabilities.

Prior to LBIE entering administration, LBIE and Citigroup - acting both in its own capacity and as agent for third parties - had entered into a large volume of complex and vanilla OTC derivatives, stock lending, repo transactions and prime brokerage and trading arrangements. As a separate arrangement, Citigroup had also acted as a custodian for LBIE in a number of countries.

Citigroup has been holding LBIE's custody assets whilst it assessed its exposure to LBIE and to Lehman entities across the globe. Citigroup and LBIE have, during the course of the administration, taken steps to return client assets held in custody with Citigroup.

Paul Copley, a PwC restructuring partner who led the settlement for LBIE said:

"This is a landmark deal which the team has worked extremely hard to achieve, over many months.  This is by far the largest single deal we have undertaken and easily the most complex to negotiate and then structure, given the sheer scale of the legacy relationship between Citigroup and LBIE.  This is a major step forward for the LBIE estate."