Lehman wins court approval to exit bankruptcy

December 15, 2011 5:21 AM

NEW YORK - Lehman Brothers Holdings Corp, now just the odds and ends of the global financial behemoth that collapsed in September 2008, received court approval on Tuesday to exit bankruptcy early next year.

Lehman may now wind down its remaining operations, U.S. Bankruptcy Judge James Peck said at a hearing in New York.

Once a mammoth investment bank and brokerage, Lehman is now a collection of assets including real estate, private equity and banking investments. "Lehman may one have been a too-big-to-fail ... global financial institution, but it was not to big to resolve in Chapter 11," Peck said, his voice choked up. He has spent more than three years overseeing the bankruptcy. Lehman proposed to the court on Tuesday that its bankruptcy exit occur no earlier than Jan. 31, giving it time to prepare to stand on its own, and paving the way for payouts to creditors to start in 2012.

The company had $639 billion in assets when it went bankrupt. Some of that money was returned to brokerage customers in a separate proceeding. There remains $65 billion to be returned to creditors who have $450 billion in claims, a group that includes debt investors and trading partners from before the bankruptcy, like Goldman Sachs. While Lehman winds down, it will continue to manage its holdings in real estate company Archstone, banks, asset manager Neuberger Berman and private equity. Looking back to the long day that began on Sept. 14, 2008, and continued into the bankruptcy filing the next day, Lehman's lead lawyer, Harvey Miller of Weil Gotshal & Manges, remembered how the meltdown started. "I see the chaos, the confusion and the distress on the faces of hundreds of Lehman employees flooding into the enterprise's headquarters at 745 Seventh Avenue in their attempt to gather their belongings before a potential lockdown
of the building," Miller told the court.

Unwinding
At the time of the bankruptcy, Lehman was an international company with businesses and employees around the globe. Many of Lehman's 25,000 employees were saved by asset sales but thousands still lost their jobs. In the end, 23 different Lehman companies were included in the bankruptcy proceedings. In bankruptcy, Lehman sold many of its assets, from valuable artwork to complex Wall Street securities; achieved settlements with creditors, investors and trading partners; and exited real estate leases like its Canary Wharf
building in London and sold buildings. The bankruptcy has been tumultuous, with lawsuits creating sideshows to the already complicated business of unwinding and valuing securities such as credit derivative swaps.

One of those legal cases put Lehman and Barclays executives on the witness stand to determine if the deal struck selling Lehman's bank to Barclays was fair. At times, the bankruptcy has provided a deeper look at the kinds of conversations that took place in the months ahead of the company's collapse, when the credit markets were contracting and taking down competitors, such as Bear Stearns.

Lehman's own role in its downfall, particularly the actions of executives like CEO Richard Fuld, were also the subject of numerous investigations by government agencies. Fuld was forced to testify before Congress and said that he did not know about an accounting tactic known as Repo 105 that a bankruptcy court examiner said had contributed to the company's decline by creating the illusion that it had a lower debt-to-equity ratio than it actually did. Fuld and others at Lehman argued that many of their problems were due to investors who in the months ahead of its implosion sold the stock short.

Post bankruptcy
Lehman attorney Miller told Judge Peck on Tuesday that only one objection remained among the thousands of
claims that have been made against the company. That objection, which kept the proceedings from moving even more quickly, was withdrawn.

The Lehman wind-down plan, which 95 percent of voting creditors approved last month, was the end game to
lengthy negotiations to a massive settlement. Under Lehman's plan for post-bankruptcy dealings, it will pay periodic distributions to its creditors. "It seems almost like yesterday that we started this journey. In another context to some of us it seems we have spent a lifetime working on Lehman," Miller said.

Fees for the Lehman bankruptcy's advisers and lawyers have totaled about $1.5 billion.

(Source Thomson Reuters News&Insight)

6 December 2011

Michiel R.B. Gorsira and Robert F. van Beemen of law firm VanEps Kunneman VanDoorne are bankruptcy trustees of Lehman Brothers Securities N.V. (“LBSN”) on Curacao.