The Hindu Business Line : IT cos may not dispute Lehman’s ‘cure amounts’

Mumbai, Sept. 25 No Indian technology firm has yet objected to the ‘cure’ amounts fixed by Lehman Brothers as part of the dues it owes outsourcing vendors. Interestingly, several global vendors of the fallen financial services giant have objected to the amounts offered to fix contracts defaulted by Lehman.

To transfer contracts from Lehman to Barclays, the bankruptcy law requires making up any payments that were missed. In other words, the ‘cure amount’ is a cure to all the claims that vendors might otherwise have against Lehman, according to a senior industry observer. When a bankrupt company and its creditors disagree on the cure amount, the bankruptcy judge takes a call on it, he added.

More than 80 of the 345 filings to Lehman’s bankruptcy docket till date are related to objections (to the cure amount) by companies such as Microsoft, Verizon, EMC Corporation, Keane and others. AT&T (representing AT&T Wireless, SW Bell, Bell South, Cingular Wireless), says it is owed more than $3 million, as opposed to the $ 0.69 million outlined as the current ‘cure’.

No filing till date

Despite cure amounts being lesser than existing defaults on contracts for many technology firms, not a single filing has been made by any of Lehman’s Indian vendors till date.

It may be noted that Lehman’s contracts with 10 outsourcing vendors (TCS, Wipro, Satyam, HCL, Satyam, Cognizant, Polaris, eClerx etc) will be assumed and assigned to Barclays. Thus, a cure amount of $5.8 million is due to these 10 companies, according to lehman-docket.com.

Of this, eClerx, a KPO, has been assigned a cure amount of $0.5 million, though it said in a filing to the bourses this week that Lehman owes it about $1 million till September.

“We are yet to receive advice from both our auditors and lawyers and hence I will not like to make a formal commitment either way. However, at this point the odds are less that we will make a formal complaint,” Mr P.D. Mundhra, Executive Director, eClerx, told Business Line.

Polaris satisfied

Meanwhile, Chennai-based Polaris Software Labs seems satisfied with a ‘cure’ of $0.5 million. “The outstanding due to us was in the same range. So, we will not be contesting the cure amount,” the company CEO, Mr Arun Jain, said. A senior official from Satyam echoed similar sentiments.

Both TCS ($1.23 million) and Wipro ($2.29 million) have been assigned a combined cure amount of $3.58 million. On being asked whether TCS would contest this amount, a company spokesperson declined comment. A Wipro spokesperson too did not comment citing the silent period before the quarterly results.

Since these contracts have already been assigned to Barclays, Indian firms do not want to unnecessarily complicate things by challenging the ‘cure’, an industry official said. “Also, since these are not large amounts, Indian vendors would be keen to maintain the relationship than recover dues for, say, 30 days of work done," he said.

Vendors can file court objections to the ’cure’ till October 3.

Related Stories:
Lehman owes $1m to eClerx
RBI slaps curbs on Lehman’s India arms

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