Finance Blog number 1

Federal Labour Minister Rona Ambrose is urging the union representing striking Canadian National Railway locomotive engineers to accept binding arbitration as management tried to keep the trains running Saturday.

Ambrose said in a statement she’s "disappointed" the Teamsters union and CN couldn’t reach an agreement before some 1,700 engineers across the country walked off the job Friday at midnight.

Despite sharing several railways in the GTA, CN representatives say GO Transit will not be affected by the engineers strike.

Ambrose said CN has already agreed to binding arbitration and the government is ready to appoint an arbitrator once the union gives its approval.

The Teamsters did not immediately respond Saturday to Ambrose’s statement.

The union has said a strike could have been postponed had the railway agreed to negotiate and not impose a 1.5 per cent wage increase and new mileage caps.

CN made contractual changes after three days of negotiations broke off Nov. 20 following 14 months of talks.

The Teamsters Canada Rail Conference (TCRC) responded by issuing a 72-hour strike notice, saying CN was effectively locking out employees by unilaterally changing the terms of the collective agreement.

TCRC president Daniel Shewchuk said in an interview Saturday that while the union made "substantial movement" during Friday’s talks, the railway wouldn’t budge.

The union has said raising the mileage cap – the maximum distance engineers can travel in one month – by 500 miles to 4,300 mileswould require some workers to work seven days a week, with no time off, and cause layoffs. CN says its locomotive engineers work on average 37 hours a week, and the new cap would increase that to 41 hours.

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The Federal Reserve on Tuesday raised its estimate for economic growth next year and forecast lower unemployment ahead, although the jobless rate will stay uncomfortably high for at least the next three years.

The projections were included in the minutes of the Fed’s Nov. 3 and 4 meeting. The forecast shows the central bank expects gross domestic product, the broadest measure of the nation’s economic activity, to grow between 2.5% to 3.5% in 2010. That’s a bit more bullish than the 2.1% to 3.3% growth it had forecast for the period back in June.

The unemployment rate, which hit 10.2% in October according to the Labor Department’s latest reading, is expected to improve to between 9.3% to 9.7% for all of 2010. The Fed’s June forecast was for 2010 unemployment between 9.5% to 9.8%.

The central bank’s forecasts don’t show the labor market getting a lot better in the next few years. Its 2011 forecast is for unemployment between 8.2% to 8.6%, while 2012 unemployment is expected to be between 6.8% to 7.5%, still above the average 6% annual unemployment rate recorded by the Labor Department over the last 30 years.

Going forward from 2012, the forecast is for the unemployment rate to improve to between 5% to 5.2%, levels not seen since the first few months of the latest recession. But that long-term employment outlook is slightly more bearish than the Fed’s previous estimate of a 4.8% to 5% long-term unemployment rate.

Keith Hembre, chief economist First American Funds, said the slightly more optimistic numbers in the forecast are more bullish than the commentary in the minutes, which discuss many areas of weakness and uncertainty about the state of the recovery.

"They’ve had a tendency to be overly optimistic (in the numerical forecasts), and that’s likely the case again today," he said. For example, a year ago the Fed’s forecast was projecting that unemployment in 2009 would come in at between 7.1% to 7.6%. Unemployment hit the upper end of that forecast, 7 easy payday loan.6% in January and has risen steadily from there.

Hembre said the slightly more bullish numbers from the Fed shouldn’t be taken as a sign that the central bank is getting close to raising rates or removing other programs it has put in place to pump trillions of cash into the economy.

While Fed officials have said they believe that the recession that started in December 2007 likely ended at some point this summer, there have been repeated warnings that growth would be somewhat sluggish going forward. Fed Chairman Ben Bernanke recently said economic headwinds, including tight credit and continued weakness in the labor market would stop growth "from being as robust as we would hope."

The Fed’s forecast comes the same day the Commerce Department lowered its estimate for the third quarter’s GDP growth rate to 2.8% from its earlier reading of 3.5%.

Despite the lower unemployment estimates released Tuesday, the minutes they were attached to said that Fed "staff boosted its projection for the unemployment rate over the next several years." Those projections were more detailed than the annual estimates spelled out in the summary.

The Fed policymakers were particularly concerned that the forecasts were more uncertain than normal, and they were worried about a sluggish recovery.

"Business contacts continued to report plans to be cautious in hiring and capital spending even as demand for their products increased," according to the minutes.

But Fed policymakers seemed to be more optimistic than they had been at their late September meeting, when they believed there was a greater risk of the economy not living up to the forecasts. Now they believe there is roughly equal chance that the economy could do better than expected as they are worried about it falling short. 

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Japanese Finance Minister Hirohisa Fujii said the government is watching currencies “very closely” after the yen advanced to a 14-year high against the dollar, threatening the country’s export-led recovery.

“If currencies make abnormal movements, we may need to take appropriate action,” Fujii told reporters in Tokyo today. “Now we’re at the stage where we need to closely monitor movements in currency markets.”

The comments suggest Japan is closer to stepping into currency markets for the first time in more than five years as the rising yen erodes exporters’ profits in the wake of the country’s worst postwar recession. The currency’s more than 8 percent advance over the past three months has also added to Japan’s deflationary pressure by driving import costs lower.

“The possibility of intervention has apparently increased,” said Masafumi Yamamoto, Tokyo-based chief foreign- exchange strategist at Barclays Bank Plc. “Stocks have been falling and the government declared Japan is in a deflationary state. In this environment, there’s no reason for it to tolerate a higher yen.”

The yen rose to 86.91 per dollar at 9:16 a.m. in London, after climbing to 86.30, the highest since July 1995. The Nikkei 225 Stock Average slid 0.6 percent to a four-month low.

Fujii, 77, said yesterday that the dollar’s weakness is spurring the yen’s advance. Today he said “a strong U.S. dollar is in their national interest. There is no change in our support for that.”

‘Huge Risk’

Manufacturers are contemplating shifting operations abroad because the yen’s gains make it costlier to run factories at home. A stronger yen would be a “huge risk” to producing autos in Japan, Nissan Motor Co. Chief Operating Officer Toshiyuki Shiga said this month.

“There is no doubt that the yen’s strength, if it accelerates further, would affect” exporters’ profits and the economy, said Chief Cabinet Secretary Hirofumi Hirano told reporters. “We must carefully assess the impact. If that happens, the government would be asked to respond.”

Hirano said he spoke with Fujii about the currency’s surge today without discussing intervention.

Japanese authorities haven’t stepped into the currency market since the first three months of 2004, when it sold a record 14.8 trillion yen ($171 billion). Fujii had spurred some of the yen’s gains after he took office in September by saying he opposed “easy intervention.” He has since toned down his remarks by saying Japan will act if currency moves are “abnormal or disorderly.”

Fujii’s ‘Discretion’

Vice Finance Minister Yoshihiko Noda said the government isn’t considering stepping into the currency market now, Reuters reported earlier today. He later backed away from the remarks, saying at a news conference that yen policy “is under the minister’s discretion” and declining to comment on the possibility of government action.

“The chances of intervention would increase if the dollar-yen breaks below 85,” Tomoko Fujii, a foreign-exchange strategist at Bank of America-Merrill Lynch in Tokyo, wrote in a report published today. “Intervention backed by a monetary policy change is more effective than intervention without supportive monetary policy action.”

Fujii at Bank of America-Merrill Lynch said it’s unlikely that the U.S. would join Japan in stepping into foreign- exchange markets, barring a “meltdown caused by a dollar crisis.” Expectations for the Bank of Japan to add liquidity to the economy will grow should the yen’s gains “sharply” lower stock prices, hurt business sentiment and exacerbate deflation, she wrote.

Deflation’s Return

The government last week said Japan was in a “mild deflationary phase.” Price declines blighted Japan during its so-called lost decade of stagnation after an asset bubble burst in the early 1990s.

Meanwhile Finance Minister Fujii said yesterday that China’s currency is probably too weak, backing calls from the U.S. and Europe to let the yuan appreciate.

“It can’t be helped that people see the yuan as undervalued given the strength of the Chinese economy,” Fujii said in an interview in Tokyo. “The yuan is pegged to the dollar. I don’t think such a situation is necessarily good.”

The remarks are Fujii’s strongest on the Chinese currency since he took office in September, adding to concerns voiced by officials including European Central Bank President Jean-Claude Trichet this month about the yuan’s flexibility. The yuan’s peg to the dollar has sheltered China from the slide in the U.S. currency that’s making Japanese and European exports more expensive.

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Delta Air Lines Inc. has renewed its vendor contract with gategroup, parent company of food contractor Gate Gourmet.

The multi-year extension, valued at more than $1 billion in revenue over the life of the contract, also involves gategroup subsidiaries Gate Safe, eGate Solutions, Pourshins and deSter, the company said in a Wednesday news release.

“Delta is a leading customer for gategroup and its brand companies and has been for more than 50 years,” Guy Dubois, gategroup CEO, said in a statement. “We're delighted to call the world's largest airline one of our top customers. The scope of this business validates gategroup's strategy of building a brand portfolio that provides end-to-end solutions to the travel industry, and demonstrates the cross-selling power of the brands.”

The deal with Atlanta-based Delta (NYSE: DAL) covers 40 airports worldwide and expands catering service to airports in Amsterdam, Fort Lauderdale, Fla electronic check payday advance., Los Angeles and Newark, N.J.

Gate Safe, the catering screening and security subsidiary of Zurich-based gategroup, will expand to serve all Delta, Northwest and Delta Connection stations currently served by Gate Gourmet in the U.S.

The contact also extends agreements with eGate and Pourshins, the company’s in-flight catering management and food, beverage and equipment sourcing and logistics arms.

"Consistency of product delivery is a key component of Delta's brand experience for our customers," Joanne Smith, Delta senior vice president of in-flight services, said in the release. "The complete integration of catering solutions is another important step in bringing together the best of Delta and Northwest."

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Retail gasoline prices headed downward in most places to begin one of the country’s busiest travel weeks, with more than 33 million people expected to hit the road for the Thanksgiving holiday.

Americans are remaining closer to home because of anxiety about the economy, and demand for gasoline is weaker now than it was last year at this time.

That is telling because a gallon of gasoline then cost only $1.93 as the economic crisis unfolded in 2008.

Unlike last year, however, gas is not falling sharply and though prices fell overnight, it still cost about $2.64 per gallon on average, according to Department of Energy data and also auto club AAA, Wright Express and Oil Price Information Service.

"I think we will see some increases in the spring like we always do," said Fred Rozell, retail pricing director at OPIS. "But at this point I think we’re going to kind of see a status quo for a while."

Gasoline prices were either flat or falling in most places, but rose nearly 4 cents across the Midwest, according to a report Monday from the Energy Information Administration.

Crude prices have remained relatively strong, which has helped keep gas prices well above $2.50. A survey by AAA last weekend found that the number of Americans traveling away from home for Thanksgiving will be up just 2.1 percent this year from 2008.

Crude prices have dragged retail gasoline prices higher throughout the year and rose by 9 cents per barrel on Monday. Benchmark crude for December delivery settled at $77.56 a barrel on the New York Mercantile Exchange.

Crude in storage is above normal levels for this time of year and refiners that turn oil into gasoline, jet fuel and diesel are cutting back because demand is so weak.

Valero Energy became the latest to shut down a refinery Friday, the largest U.S. facility shut down so far this year.

That follows other refiners, including Sunoco and Western Refining, who have shut down plants in recent months and laid off almost 1,000 workers.

Refiners say they can’t raise the price of gasoline and jet fuel because people aren’t traveling as much, but they must pay higher prices for crude because of the weak dollar.

Air travel is projected to decline 6.7 percent, or 2.3 million travelers this year compared to 2.5 million in 2008.

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The fourth of November was a big day for Jeff Andrews. It also signalled a bold new direction for one of Canada’s largest auto parts makers.

The president of Pro-Power and Energy Ltd. of Port Hope spent a good part of that day driving to Detroit, where he got together with Ken Rossman, an American who manages new business deals for Ontario auto parts manufacturer Linamar Corp.

It was there, ironically on U.S. soil, that the two men signed a 10-year supply agreement that committed Linamar to manufacturing a new – and the first – made-in-Ontario wind turbine at the company’s headquarters in Guelph.

Specifically, Linamar will be making a 2-megawatt "nacelle," the heart and brains of a wind turbine that houses all the mechanical gear used to generate electricity.

CWind Inc. of Owen Sound designed the device, and in partnership with Pro-Power has set up separate companies – WindPro and WindBlade – to manufacture the towers that will hold the massive Linamar-made machines, as well as the blades that connect to them.

"It’s all signed, sealed and delivered," says Andrews, adding that the agreement is a big one for Linamar. "We’re talking about $3.6 billion in orders for them over 10 years."

Not bad for a company that reported $2.3 billion in revenues in 2008. Linamar, like other companies that have depended heavily on the auto industry, is diversifying its customer base. And the energy sector – the greener the better – is what’s capturing their attention.

Aurora-based auto parts giant Magna International is producing electric bicycles, for example, and in October signed an agreement to manufacture, through subsidiary Cosma International, solar equipment for California start-up SkyLine Solar.

Two other auto parts entities – Meikle Automation Inc. of Kitchener and Markham-based Woodbine Tool & Die – have picked up business in the solar PV market as well.

Linamar, in many ways, is leading the pack. It expects its energy-related business will grow to about $1 billion annually within the next 10 years, up substantially from roughly $50 million in 2008.

Chief executive officer Linda Hasenfratz says the company’s revenue stream has already grown by 50 per cent this year, much of it through making wind-turbine parts and production equipment for the European market.

The company also makes engines that generate power from solar heat, part of a deal with Scottsdale, Ariz.-based Stirling Energy Systems.

But the deal with CWind and Pro-Power potentially puts Linamar on a different plane.

If the new wind turbine is successful, it stands to become a lucrative chunk of the company’s multibillion-dollar manufacturing operation.

"When we came upon CWind, we saw a much bigger opportunity, that of producing the entire nacelle. This is a much larger contribution to the wind turbine than we’ve done in the past," says Hasenfratz.

The stars, in a way, are aligning for the 43-year-old company. As the wind industry grows, so, too, are the wind turbines being developed. The bigger the turbine, the more efficient it is at converting wind energy into electricity.

The largest to date stands nearly 200 metres tall and has a blade-to-blade diameter of 126 metres. Nacelle, blades and tower together can weigh more than 300 tonnes.

These massive sizes, however, create huge challenges for turbine manufacturers based in Europe and parts of Asia that are looking to serve the North American market.

"When you look at products of this significant size, the logistics and cost of shipping are really prohibitive, so you’re almost forced to go local," says Hazenfratz.

"If oil prices go up, fuel prices go up, and then it becomes less cost-effective to ship product thousands of kilometres."

Linamar also plans to capitalize on new rules in Ontario that require wind and solar equipment to have a certain amount of local content paydayloans. Add to that generous incentives in the province for developing green-energy projects and the timing for introducing the CWind turbine couldn’t be better.

Already, CWind has its first two years of production pre-sold to Ontario-based wind developers, with strong interest also coming from British Columbia, Saskatchewan and as far as Ireland. "The phone is ringing off the hook," says Andrews, adding that Linamar’s involvement has brought credibility to CWind’s design.

This is no ordinary wind turbine, part of the reason Linamar has been so attracted to the project.

"It’s unique in the industry," says Paula Mayor, manager of business development for New World Generation Inc., parent company of CWind. Her father, Paul Merswolke, is co-inventor of the CWind design.

Most utility-scale wind turbines are designed to turn a drive shaft that is connected to a gearbox. The gearbox speeds up the rotation of a second shaft that connects to an electrical generator.

The problem is that gearboxes are heavy and prone to failure under mechanical stress. This leads to higher maintenance costs over the life of the turbine, as well as increased noise as the gearbox wears out.

The CWind turbine eliminates the gearbox altogether. Instead, the drive shaft is connected to a big wheel, similar in shape to a can of tuna. Hugging the wheel are eight tire-lined shafts, each connected to its own electrical generator. As the big wheel turns, it spins the smaller shafts.

If the wind is light, some of the shafts can be moved away from the wheel to reduce friction. As the wind picks up, more shafts hug the wheel to capture the additional friction energy.

It’s a simpler, more efficient design that has been validated by two independent engineering firms. It has also been demonstrated on a small 65-kilowatt prototype.

"Linamar’s engineers were impressed as they poured over the data and the drawings," Mayor recalls.

Between now and March 2011, the companies will work together to develop a 2-megawatt prototype and two pre-commercial turbines, which must be tested for six to eight months before being certified. After that, commercial production will begin.

Linamar’s merger in 2003 with the engineering firm McLaren Performance Technologies, of Formula 1 auto racing fame, will come in handy. The Michigan-based engineering group hopes to do with CWind what it did for the solar engine it developed for Arizona’s Stirling Energy.

Charles Andraka, a project engineer at Sandia National Laboratories, a U.S. Department of Energy research centre in New Mexico, says Linamar took the early solar engine design and improved it dramatically. Both old and new models have been tested at Sandia’s solar research facility.

"They took a lot of weight out of the system and simplified it quite a bit," says Andraka. "The engine was completely redesigned."

Linamar’s important role in re-engineering these technologies explains, in part at least, why it increasingly wants to put its own stamp on the final product.

In the case of CWind’s nacelle, the supply contract stipulates that the machine be clearly marked "Powered by Linamar." It follows the same marketing logic as the "Intel Inside" logo on computers that made chipmaker Intel Corp. a household name.

That’s just fine with Mayor, who is more than happy to have Linamar use the CWind design as a springboard for new business, particularly at a time when European wind-turbine makers are eyeing the North American market.

"They’re our main supplier of the nacelle. They bring capability to the table, and they bring reputation to the table," Mayor says. "They are moving into this industry and they want to be recognized."

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Thailand’s economy probably contracted the least in a year last quarter as a nascent global recovery and government spending began to pull the nation out of its first recession in a decade.

Gross domestic product fell 3.2 percent in the third quarter from a year earlier, after contracting 4.9 percent in the previous three months, according to the median estimate of 16 economists surveyed by Bloomberg News. The government will release the data on Nov. 23 at 9:30 a.m. in Bangkok.

The benchmark stock index has risen two straight quarters since the start of April and the baht gained 4.5 percent against the U.S. dollar this year as companies including Hana Microelectronics Pcl report rising orders. Prime Minister Abhisit Vejjajiva said yesterday the government will pursue its stimulus spending plans amid lingering “political problems.”

“A gradual global recovery, fiscal stimulus packages and easy money policy are resulting in improved GDP performance,” said Luz Lorenzo, an economist at ATR-Kim Eng Securities Inc. in Manila. “The improvement will be gradual. This is barring any grave political developments.”

Singapore, which raised its 2009 GDP estimate in October, said yesterday its economy will grow 3 percent to 5 percent in 2010 after shrinking as much as 2.5 percent this year. Malaysia may report today that its recession eased last quarter, according to a Bloomberg News survey.

Interest Rates

The Bank of Thailand said last month Southeast Asia’s second-largest economy is “out of recession”, citing improving employment and quarter-on-quarter GDP expansion. Still, the central bank refrained from raising borrowing costs for a fourth straight meeting on Oct. 21 as it judged the nation’s economic recovery to be at “an early stage.”

There may be cause to keep interest rates low for a while as economists including Morgan Stanley Asia Chairman Stephen Roach say the global recovery faces risks.

“My outlook remains extremely cautious although we can see the worst is over” for the global economy, Roach said in Singapore today. Asian economies are still too export dependent, he said.

Thailand’s consumer confidence fell for the first time in five months in October on concern that the economic recovery may be derailed by rising oil prices, politics and a court case that has stalled 76 government-approved projects on pollution complaints.

Political Risk

At least five people were injured after a bomb exploded at a Nov. 15 protest against former Prime Minister Thaksin Shinawatra, the Nation newspaper reported this week. Power in Thailand has shifted between parties allied to Thaksin and his opponents since the 2006 coup that ousted him, with protests and leadership changes hurting successive governments’ ability to implement spending plans.

Abhisit’s government has managed to stay in power for almost a year and implemented a 116.7 billion-baht stimulus package in the first half of 2009. It plans to spend 1.3 trillion baht on transportation, logistics, health and education projects over three years to help revive the economy.

The fiscal spending helped “stop the economic contraction” and prevented unemployment from jumping, Abhisit said Nov. 16.

“Our only concern is politics,” said Santi Vilassakdanont, chairman of the Federation of Thai Industries. “If the political stability continues like this, the economy can move ahead. If not, things may turn bad again.”

Return to Growth

The government expects the Thai economy to return to growth this quarter. Thailand’s exports dropped the least in 11 months in September as more than $2 trillion in stimulus by governments worldwide helped revive global demand.

Hana Microelectronics, which makes parts for computers and mobile phones including Apple Inc.’s iPhone, has restored its workforce to “pre-crisis” levels and will spend about $20 million by March 31 to expand capacity and meet rising demand, Chief Executive Officer Richard Han said.

“We continue to see robust demand,” said Han. “We expect the fourth-quarter performance to be an improvement over last year.”

The central bank has kept its benchmark interest rate unchanged at 1.25 percent since cutting it by 2.5 percentage points from December to April. Thai consumer prices rose for the first time in October after falling for nine consecutive months.

“The recovering global economy will lead to improving exports and tourism,” Abhisit said yesterday. “The government is also committed to spend money under our stimulus plan. Everything still goes as planned despite political problems” that may persist into next year, he said.

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AOL plans to cut one-third of its workforce, or about 2,500 jobs, in an effort to trim some $300 million in annual costs as part of the Internet company’s planned spin-off from Time Warner Inc.

The struggling Web pioneer, which is now focused primarily on advertising-supported content, said on Thursday that it would start with a volunteer buyout program and move on to involuntary layoffs if enough workers do not step up.

AOL said the layoffs would result in restructuring charges of up to $200 million, which it announced last week. It said that substantially all the charges would be incurred from the date of the spin-off through the first half of 2010.

Earlier this week, Time Warner said the spin off will take place on December 9, nine tumultuous years after one of the most disastrous corporate mergers in history.

When AOL’s plan to merge with Time Warner was announced in January 2000, the Internet company was valued at $163 billion.

The combination was meant to herald the future of content distribution via the Internet, but the promised benefits were never achieved.

The December spin-off is expected to effectively value AOL’s market capitalization at around $3 billion .

AOL said that Chief Executive Tim Armstrong told employees of the layoff plan via video and email, and said that he was going to forgo his own bonus for 2009.

Armstrong, formerly at Google Inc, was appointed in March to prepare AOL for becoming an independent entity.

The company, which has been examining its cost structure for the last four months, said the voluntary layoff program will begin on December 4 and run through to December 11, and gives people more choice than if they waited for final cost recommendations.

The layoffs start in the United States, where AOL employs about 4,500 people, and will extend to the company’s global operations, the company said.

Time Warner shares were down $1.12, or 3.4 percent, to $31.70 on the New York Stock Exchange. The overall Dow Jones Industrial Average is down 1.3 percent on the day.

(Reporting by Franklin Paul and Sinead Carew; Editing by Derek Caney)

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The European Ombudsman rebuked European Union regulators on Wednesday for procedural errors in their antitrust probe of Intel but the censure will not affect a 1.06 billion euro ($1.58 billion) fine against the U.S. chipmaker.

The European Commission levied the record fine in May for illegally shutting out rival AMD. The ombudsman’s decision is non-binding but it could help the world’s No. 1 chipmaker in its appeal against the ruling to Europe’s second-highest court.

While the European Ombudsman can only make recommendations, he is one of the few independent checks on the Commission’s antitrust agency, which critics say acts as judge, jury and prosecutor against companies. In his report, Ombudsman P. Nikiforos Diamandouros said he “found maladministration on the grounds that the Commission failed to make a proper note of a meeting with computer manufacturer Dell relating to the Intel investigation.”

He did not make any finding as to whether the EU executive had infringed Intel’s rights of defense.

The ombudsman also did not make a finding of maladministration over Intel’s second allegation that the Commission had encouraged Dell to enter into an information exchange agreement with AMD.

The Commission said it did not agree with the ombudsman’s finding that it should have prepared a formal note on the meeting and said it had given Intel the chance to comment on the non-confidential version of the internal note cash till payday.

“Such internal notes are normally not accessible since they also reflect the Commission’s investigative strategy which parties do not have a right to access,” the EU executive said in a statement.

“Intel’s rights of defense were fully respected throughout the procedure.”

Intel said the ombudsman’s decision validated its charges.

“Intel has consistently said that DG Comp ignored evidence that was potentially exculpatory for Intel and that it was selective in its use of other evidence,” the company said in a statement, referring to the Commission’s Directorate-General for Competition.

The ombudsman’s confidential decision was sent to the Commission and Intel in July this year, before Wednesday’s non-confidential decision was released following consultation with Intel, Dell and AMD, the ombudsman said.

($1=.6712 Euro)

(Reporting by Foo Yun Chee; editing by David Brunnstrom and David Cowell)

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Lehman Brothers Holdings Inc has filed a lawsuit against Barclays Capital Inc alleging the British bank took control of excess assets in collusion with Lehman executives when it bought its U.S. brokerage business a year ago, court documents show.

Lehman filed for bankruptcy on September 15, 2008, in the largest U.S. bankruptcy in history. Its flagship U.S. brokerage business was sold to Barclays less than a week later in a hurriedly assembled deal.

Lehman said in September this year that Barclays Capital got an $8.2 billion “windfall profit” due to the fire sale of its business for an undisclosed $5 billion discount off the book value of securities transferred to Barclays.

“The windfall to Barclays was not disclosed to the Court, the Lehman Boards or Lehman’s lawyers so as to allow the transfer to Barclays of billions of dollars in excess assets, without consideration, in a manner designed to avoid judicial, corporate and creditor oversight,” Lehman said in a Monday court filing.

The charges come after Lehman received approval in June to probe whether Barclays got “too good of a deal” when it bought Lehman’s brokerage business, as the British bank was able to quickly book a $4 direct lender payday loans.2 billion gain on its $1.75 billion purchase.

Barclays said at the time that it did not expect the probe to result in any additional claims.

In the lawsuit, Lehman requested the court to order Barclays to “disgorge to Lehman any ill-gotten gains it obtained” and pay punitive damages.

A Barclays Asia spokesman said in an email that all queries on the lawsuit should be directed to its New York office. Barclays’ New York officials were not immediately available for comment, outside of normal U.S. hours.

The case is In re: Lehman Brothers Holdings Inc, U.S. Bankruptcy Court, Southern District of New York, No. 08-13555. (Reporting by Supantha Mukherjee and Ajay Kamalakaran in Bangalore; Editing by Muralikumar Anantharaman)

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