One Year Ago In Derivatives Week

A dispute between Lehman Brothers Holdings Inc. and Wells Fargo concerning repayment rights on a collateralized debt obligation where Lehman served as swap counterparty was set for a pre-trial hearing in March. The hearing was the first of its kind concerning CDO payment waterfall provisions. [In November, the U.K. Court of Appeal backed the validity of the flip clause in the Dante CDO--giving noteholders the right to be paid out before the defaulted counterparty, Lehman Brothers International (Europe). But Lehman argued the case needed to be heard in the U.S. where it is protected by bankruptcy law, and the Bankruptcy Court for the Southern District of New York overturned the U.K. court decision. There now needs to be a special hearing to harmonize the judgments (DW, 1/27.]