ABOUT 1000 small investors, including several Australian local councils and charities, are a step closer to recovering $125 million worth of bonds that have been the subject of a legal battle since the collapse of Lehman Brothers.
On Friday night the UK Court of Appeal rejected an attempt by Lehman's US bankruptcy trustee to lay claim to the assets, which were collateral behind a series of complex debt securities called Mahogany.
The investors purchased the securities - known as synthetic collateralised debt obligations - from Grange Securities, an Australian company bought by Lehman in 2007. Since Lehman's collapse last year, the Mahogany trustee, Perpetual, has been fighting a legal battle with Lehman on behalf of investors seeking access to the collateral.
The collateral is made up of debt issued by ANZ and the Royal Bank of Scotland, and is being held in Britain until it is clear who has first dibs on the assets.
The UK court found that the small investors ranked above Lehman, affirming a previous finding in the High Court of England and Wales.
Lehman is seeking a further challenge to the ruling in the UK Supreme Court - its last possible avenue of appeal.
The group executive of Perpetual Corporate Trust, Chris Green, said he hoped investors would reclaim most of the $125 million by early next year, if all went to plan.
But exactly how much investors will recoup is uncertain, due to a complex web of legal battles between Lehman investors and creditors seeking to salvage value from their investments.
''While the decision by the court is a significant milestone in the recovery process, [Perpetual Trustees] could be frustrated by yet another appeal from [Lehman Brothers] and their insistence in pursuing separate court action in the US,'' Mr Green said.
