Bankrupt Lehman Brothers sues Intel

The bankrupt Lehman Brothers is suing Intel, claiming that the chip company violated the terms of a collateral swap agreement.

Days before Lehman filed for bankruptcy in 2008, Intel gave $1 billion to a derivatives unit of Lehman Brothers in exchange for 50.5 million Intel shares.

According to Reutersthis was supposed to be delivered on 29 September, 2008. Lehman Brothers OTC Derivatives posted $1 billion in cash collateral to Intel as part of the agreement. The agreement said that Chipzilla would be compensated for losses in case of early termination of the deal.

It gets complicated, but Intel claimed that Lehman was to deliver “$1 billion in Intel common stock,” but Lehman said that the agreement was to deliver 50.5 million of Intel shares and it didn’t matter how much they cost.

The value of 50,552,943 shares of Intel common stock on 29 September, 2008 was about $873 million, not a billion bucks.

Chipzilla then scrapped the agreement two weeks after the company’s bankruptcy filing and took the entire $1 billion in collateral and has not bought it back. Lehman said “Intel breached the swap agreement”.

Needless to say Lehman is short of money and wants Intel to get cash back – and is seeking an unspecified amount.