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Lehman Brothers Reduces Debt By 2/3!
Feb. 2 (Bloomberg) -- Lehman Brothers Holdings Inc., in its fifth month of bankruptcy, has about $200 billion of unsecured liabilities left to pay, down two-thirds from when it sought court protection, Chief Executive Officer Bryan Marsal said.
Lehman originally had $613 billion in debt, of which $400 billion was short term loans offset by a similar amount of assets that “netted out,” Marsal said in an interview. The firm has $7 billion in cash so far to pay creditors.
“We have 500 people working the assets,” Marsal said. Based on Lehman’s bond prices of 15 cents on the dollar or less, investors anticipate recoveries of no more than $30 billion, or 15 percent of liabilities.
Marsal, 57, co-CEO of New York-based restructuring firm Alvarez & Marsal Inc., took over Lehman’s top job this year from Richard Fuld. Creditors may be paid partly in cash and partly in stock as illiquid real estate and private equity are expected to be sold in the next two to three years, said Marsal. The restructuring chief said he’s evaluating a plan to create separate companies for real estate and private equity, which would distribute stock.
Lehman Hopes For Bankruptcy Exit Within 2 Years
Lehman Brothers said on Wednesday it hoped to exit bankruptcy protection in the next 18 to 24 months, but the judge overseeing the case warned that more international coordination would be necessary to meet that goal.
“We would like to be out of this situation with in 18 to 24 months,” Bryan Marsal, the co-founder of turnaround firm Alvarez & Marsal and current chief executive of Lehman, said at a bankruptcy court hearing in Manhattan, according to Reuters.
“Too many people are saying this case is going to take five to six or 10 years. There’s no reason for this thing to be in bankruptcy for that amount of time,” Mr. Marsal said.
Mr. Marsal has been heading a team of more than 500 to wind down operations at Lehman and said he believes the situation there is now “stable,” compared with the chaos that occurred at the 150-year-old firm when it filed for bankruptcy on September 15.
But U.S. bankruptcy Judge James Peck, who also on Wednesday approved the appointment of an examiner to probe the investment bank’s collapse, warned that Lehman would have to think globally to meet such a speedy timeline.
Judge Peck said that, with dozens of insolvency proceedings pending around the world, the Lehman case is “undoubtedly the most massive cross-border insolvency in the history of the world,” and told lawyers they should work out protocols for global issues and creditor claims to be resolved efficiently.
“I am concerned that, absent some ability to tie together all of these (international) estates, that we run the risk of a ‘mouse that roared’ problem in which some estate in some other jurisdiction may control the timing of the exit in this case,” Judge Peck said.
Lehman’s bankruptcy attorney, Harvey Miller, said at the hearing that the firm has been working closely with the Lehman Brothers unit in Europe and its administrators.
Mr. Marsal took over as Lehman’s chief executive this month after serving as the firm’s chief restructuring officer for months.
As part of a status update to the court, Mr. Marsal said that, after sales of Lehman’s core U.S. brokerage unit, money manager Neuberger Berman, and several other assets, the company is focused on an orderly wind-down.
Mr. Marsal said Lehman had a cash balance of about $6 billion as of January 2, compared with about $3.3 billion on September 14, the day before it filed for bankruptcy protection.
Mr. Marsal said Lehman is working to maximize the recovery value of the firm’s assets, by resolving its derivatives book, other claims and funding commitments, and looking to sell hard assets such as real estate, art and Lehman’s fleet of planes.
Judge Peck also approved a request to appoint an examiner to probe Lehman’s collapse.
The U.S. Trustee’s office, which oversees bankruptcy cases in New York, has already interviewed several candidates for the job, U.S. Trustee Diana Adams said at the hearing.
According to U.S. bankruptcy laws an examiner can be appointed in any bankruptcy case if someone requests it and the court finds the company’s debts exceed $5 million.
When Lehman filed for bankruptcy, it listed $613 billion in debts and $639 billion in assets.
The examiner is expected to produce a report on the issues surrounding how Lehman collapsed; how it pursued the sale of key assets such as its core U.S. brokerage business to Barclays; and look for any evidence of fraud, dishonesty, or misconduct, lawyers said at the hearing.
“The examiner has to be someone who is fiercely independent, of the highest integrity and not afraid to take on anyone, including the Federal Reserve,” Mr. Marsal said. “It has to be a process where everyone can be examined.”
Lawyers representing Lehman, its creditors, the U.S. Trustee’s office and other parties are expected to meet over the next few days to work out details relating to the scope of the examiner’s investigation.
“We will support the examiner, we want transparency,” Mr. Miller said at the hearing.
REINET TO BUY LEHMAN MERCHANT ASSETS
JOHANNESBURG, March 10 (Reuters) - Luxembourg-based investment firm Reinet Investments (REIJ.J) has received approval from Lehman Brothers Holdings Inc's (LEHMQ.PK) partners to buy part of Lehman's merchant banking business.
Reinet, which is controlled by South African billionaire Johann Rupert, said on Tuesday approval was received from Lehman Brothers merchant banking partners IV LP and IV.
Lehman Brothers Holdings Inc filed for bankruptcy protection in mid-September 2008 after trying to finance too many risky assets with too little capital. It has been selling various assets since then.
Reinet was created last year when the Rupert family controlled luxury group Richemont (CFR.VX) was restructured and its stake in British American Tobacco (BAT) (BTIJ.J) spun off.
The deal on the Lehman assets is its first significant investment.
Reinet said it would initially invest up to $10 million in a joint-venture with the current management team and other investors in respect of the Lehman funds.
The Lehman funds have about $4.5 billion in assets, which include money invested and money still to be drawn down from the limited partners.
Reinet added that it would invest up to $230 million in new investments to be made over the remaining lives of the Lehman funds.
The company said the transaction is expected to close within 30 days.
Shares in Reinet were trading 3.5 percent higher at 9.32 rand by 1329 GMT, outperforming the Top-40 index of blue-chips stocks .JTOPI, which was 1.85 percent higher. (Reporting by Gugulakhe Lourie)