BANKRUPT BANKER
Lehman Brothers Holdings Inc., which filed the biggest U.S. bankruptcy said it needs an additional six months
Tuesday 30 December 2008
Lehman Brothers Holdings Inc., which filed the biggest U.S. bankruptcy in September, said it needs an additional six months to put together a plan to pay its creditors with funds from the sale of its assets. The collapsed investment bank asked U.S. Bankruptcy Judge James Peck in New York to push the deadline to file a Chapter 11 plan to July 13 from Jan. 13. The extension is warranted because of the complexity of the case and the need to protect interests in and get data from 76 foreign entities that are in separate insolvency proceedings in 15 countries, attorneys from Weil Gotshal & Manges representing Lehman wrote in court papers filed today. A hearing on the motion is scheduled for Jan. 14. Lehman’s management and professionals have “devoted a substantial portion of their time to recovering, stabilizing and marshalling an unprecedented volume of information,” according to the filing. So far they have “recovered more than half of the critical data that is needed to administer the chapter 11 cases and have begun reconstructing financial records,” that can be used to develop a chapter 11 plan, lawyers wrote. Lehman filed for bankruptcy on Sept. 15 with $613 billion in liabilities and has sold brokerage and asset-management businesses. Lehman has about $4 billion in cash as a result, according to court papers. According to estimates by Lehman Chief Restructuring Officer Bryan Marsal, the hurried bankruptcy filing that came after federal regulators refused to prop up the bank may have cost creditors as much as $75 billion, two people familiar with the information said.
A more orderly wind-down of Lehman would have allowed more time to settle about 900,000 derivative contracts the firm had which were canceled following the bankruptcy filing, preserving value for creditors, one of the people said.The contracts represent “billions of dollars” in value to creditors, Robert Lemons, a lawyer representing Lehman, said at a court hearing earlier this month. Marsal is scheduled to replace Richard Fuld as Lehman’s chief executive officer tomorrow. His New York-based turnaround firm, Alvarez & Marsal, said in November it would increase staff involved in the wind-down of Lehman to about 620 from 260 by year’s end with most of the new workers dedicated to settling derivative transactions.
Lehman creditors have asserted about $200 billion in unsecured claims against the company, one person said, adding that no estimate of creditors’ recoveries has been calculated.
Lehman won court approval Dec. 22 to divest its money management units to managers of Neuberger Berman, the biggest unit, in a deal that transferred 51 percent of the stock to the executives for no cash. Lehman retained 49 percent of the equity plus dividend-paying preferred shares.
Lehman’s New York headquarters accounted for most of the $1.54 billion the company received from Barclays for its North American brokerage. Lehman said Dec. 9 it would sell its French investment bank to a unit of Tokyo-based Nomura Holdings Inc. for 1 euro ($1.40), in exchange for reducing liabilities.
