“The parties seem pretty far apart in their perceptions of the value of the claim,” Peter Niculescu, a partner at Capital Market Risk Advisors who has worked on previous Lehman settlements, told me. “There did not seem to be from the public docs any likely avenue to reconcile their perceptions.” [...]
Lehman’s industry agreement, which required participating banks to net along strict and agreed-upon guidelines, could be an indication. “It’s not the law, but it does contain the imprimatur of commercial reasonableness given how many have agreed to it,” Niculescu said.
But a judgment with Citi would create a different precedent. “The question is how to resolve a settlement dispute involving a variety of derivatives with the non-defaulting counterparty [Citi] would never have intended to replace, and whether they should be valued at a line-item replacement cost or whether true economic replacement costs mean something different,” Niculescu said.