Any posts are my opinion, and should not be relied on for your investment decisions.
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Sorry should have said as a taxpayer. No disrespect for anyone intended.
As an American, this to me is even more of a reason to re-capitalized the GSEs and remove thier implicit guarantee. Also reduces the risk the GSEs end up on the Fed bal. sheet.
As a shareholder...really hope this happens soon.
I know...sometime between now and end of 2013 plans to reduce debt for IPO. Pretty vague.
"Archstone Inc. (ASN), the U.S. apartment landlord that’s being taken public by the estate of Lehman Brothers Holdings Inc., sold or plans to sell assets worth $1.77 billion between June 30 and the end of 2013 to reduce debt as it prepares for an initial public offering."
Hopeful Mr. Millstein gets a call now to come back to work on the GSEs (just like he did for AIG under Obama).
http://blogs.wsj.com/developments/2012/10/22/millstein-heres-how-to-revamp-fannie-freddie/
Mr. Millstein: It’s the same problem I had with AIG. When I looked at the array of assets I had, at the end of the day, I was going to be left with the largest property and casualty insurance company in the world whose own equity was probably $40-$50 billion. So was it realistic in 2009, ’10 and ‘11 to think there was a buyer who could write a $50 billion check to buy the assets of Chartis? No. I had to recapitalize it and sell it in stages in a deliberate fashion to the public markets.
The same thing with these guys—they’re so big. Who’s writing that check? Other people in Treasury and on the Hill have said, “Why don’t you break it up into bite-sized pieces and create a bunch of different Fannies?” Maybe you could do that. But this is a complicated enough restructuring without having to make it five out of one, which is tough. Taking the personnel of an integrated business, systems, and dividing it five different ways? That is one huge organizational task. I’d much rather create a system that opens it up to competition and shrinks [Fannie and Freddie] over time.
This may have already been posted, but I thought it was a good disection.
http://www.natlawreview.com/article/bankatlantic-bancorp-decision-roadblock-or-detour-to-open-bank-sale-distressed-banks
Agree with LD, I'll also play devils advocate...the chapter 11 filing is a twist. We have essentially emerged as a liquidating company (classified also as a BHC). The effort to further invest (Archstone) to maximize capital could be argued as recapitalization.
This is complex. Can we file our arguments with the trustee and further add that we fall into the "other financial obligations"?
Ebano
I respect everyone's right to an opinion. I disagree fully with your 1 to 1 ratio of pref to common. Please show where this has ever been done in corporate history. I firmly believe this will not be the first.
Additionally, the dilution factor of the TSY holding warrants of 79.9% of commons leaves a HUGE guess on common value.
GLTY with commons (sincerely if you are OK prefs are as well)
Not based on what I just read in the new FRE investor presentation (see post 905 from 4cent). Page 8, TSY is going to allow the GSEs to carry net worth reserves (sounds like in addition to loss reserves). For Freddie its $3B (starting 2013) then reduces by $.6B ea year
I was looking at callable dates to look for any equity correlation.
My thinking outloud...allow GSEs borrow at low rates (against net worth) and retire jr's over next 5years (based on call dates).
Gov't has 79.9% warrants on common.
Interesting that FRE current net worth is 1.096B + 3B allowed next year. Currently ~4.2B Jrs are callable. Most likely just a coincidence.
Just took a quick look at all Freddie Jr pref call dates
Billions callable date
0.246 2001
0.15 2003
0.149 2003
0.396 2003
0.396 2003
0.297 2006
0.248 2009
1.01 2011
0.99 2011
0.34 2011 ~4.222B callable end of 2011
5.9 12/31/12 or 2017 (fmckj)
0.5 6/30/12
0.5 3/31/12
0.325 2013
0.322 2013
0.247 2014
0.5 2017
~12.516B Total Jr Prefs
Thx 4cents,
Very interesting on page 8, the allowance to build a networth reserve starting at $3B (2013), $2.4B (2014), $1.8B (2015)...$0 in 2018. Trying to figure out - why allow the networth reserve until 2018? Isn't this equity? Is TSY building in an out to allow them to recapitalize and sell off thier stake?
On August 17, 2012, Treasury announced modifications to the Purchase Agreement aimed at supporting the continued flow of mortgage credit by providing the market with additional confidence in the ability of the GSEs to meet their commitments while operating under conservatorship
The modifications to the Agreement include:
» Replacement of the fixed 10% dividend payment with a variable dividend payment based on net worth (a “net worth sweep” dividend) beginning for the first quarter of 2013
– The agreement allows Freddie Mac to build a net worth reserve of $3 billion during 2013; the reserve will be reduced by $600 million each year beginning in 2014 until
it reaches zero in 2018
– The “net worth sweep” dividend for a quarter would be equal to the amount of Freddie Mac’s net worth in excess of the reserve at the end of the immediately preceding quarter
– If the calculation of the dividend amount for a quarter does not exceed zero, then no dividend will be paid for that quarter.
Thx cotton...scottrade shows a chart divi in July (a closer look the dates are incorrect ex date is after pay date). Looks like the April divi is the last one on LHHMQ.
The others match up
Symbol Last Div Paid date
LEHKQ 9/15/2008**
LEHLQ 7/31/2008
LHHMQ 4/22/2008
LEHNQ 7/18/2008
**-this was the same day they filed for bankruptcy.
Shortly before 1 am Monday morning (9/15/08 New York time), Lehman Brothers Holdings announced it would file for Chapter 11 bankruptcy protection[71] citing bank debt of $613 billion, $155 billion in bond debt, and assets worth $639 billion.It further announced that its subsidiaries would continue to operate as normal
Lehman shares tumbled over 90% on September 15, 2008.
I thought I saw that as well in some posts (March date). Just wanted to provide the clarification.
Technically, the 20 qtrs for the CTs are not up until July and Sept next year. See last divis paid below:
Symbol Last Div Paid date
LEHKQ 9/15/2008**
LEHLQ 7/31/2008
LHHMQ 7/22/2008
LEHNQ 7/18/2008
**-this was the same day they filed for bankruptcy.
Shortly before 1 am Monday morning (9/15/08 New York time), Lehman Brothers Holdings announced it would file for Chapter 11 bankruptcy protection[71] citing bank debt of $613 billion, $155 billion in bond debt, and assets worth $639 billion.It further announced that its subsidiaries would continue to operate as normal
Lehman shares tumbled over 90% on September 15, 2008.
Weil Gotshal have been down this path before...
http://amlawdaily.typepad.com/amlawdaily/2010/03/lehmanreorg.html
"Over time [Lamco] could dispose of any existing Lehman assets, but also perhaps look to keep other assets indefinitely and take on the management of similar assets," Hahn adds. "Some of the reports that I've read have made reference to the possibility of taking on new business, and this plan very much reminds me of the old Drexel Burnham bankruptcy years ago."
Drexel Burnham Lambert was of course another high-profile Wall Street bankruptcy client of Weil Gotshal. In that case, Hahn says Weil took the remnants of Drexel and created a "continuing asset-management entity" that later emerged from bankruptcy and was sold for some money. The value from such an asset sale goes to redeem creditors, strewn far and wide in Lehman.
RE: Prospectus, I believe it still stands. RBS, almost nationalized by HMT in 2009...three of thier numerous prefs had language in thier prospectus that the English Supreme Court ruled divis could not be suspended (they suspended all other prefs for 2 years).
Good case law for F&F pref holders as well (bet our Supreme Court has taken notes).
At issue date:
To prospectus dated June 5, 2001)
8,000,000 Preferred Securities
LEHMAN BROTHERS HOLDINGS CAPITAL TRUST VI (LEHNQ)
Lehman Brothers Holdings has granted the underwriters a 30-day option to purchase up to 1,200,000 additional preferred securities on the same terms and conditions as set forth above solely to cover over-allotments, if any.
The trust will initially issue $200,000,000 in liquidation amount of preferred securities (or $230,000,000 if the over-allotment option is exercised in full). The trust may, without the consent of the holders of the preferred securities, create and issue additional preferred securities ranking equally with the preferred securities and otherwise similar in all respects except for the issue date, issue price and the payment of distributions accumulating prior to the issue date of such additional preferred securities, provided that the issuance of the additional preferred securities does not cause the trust to be other than a grantor trust. Such further preferred securities, if any, would be consolidated and form a single series with the preferred securities. No additional preferred securities can be issued if an event of default has occurred with respect to the subordinated debentures.
Questions in my mind...is LAMCO really worth $400B at non-distressed prices and will shareholders own part of it?
Lehman Plans LAMCO Spinoff
May 14, 2009
Lehman Brothers is planning to spin off its remaining assets which include real-estate and private-equity holdings, The Wall Street Journal reports. Legacy Asset Management Company (LAMCO) has a fair-market value of around $45 billion.
Lehman values the assets of LAMCO at $400 billion at non-distressed prices including the servicing of assets worth $300 billion. The unit is in charge of corporate-bank debt and risky consumer mortgages, Miami condos and New York apartment complexes.
http://www.institutionalinvestor.com/Article/2202948/Lehman-Plans-LAMCO-Spinoff.html
That's good to hear. Are you holding CTs as well? I have a 50/50 mix of CTs and prefs (Js).
Do you still have an active blog? I've read quite a few of the equity letters to the court (Judge Peck). Again, thanks for the efforts and I'm really hopeful your efforts left the door open for equity when the POR was being written and approved.
I wonder if Troy Uhlmans efforts were successful. His blog and equity push were quite strong.
http://blogs.wsj.com/deals/2010/04/05/lehman-brothers-lives/
Wonder if hes lurking here or moved on?
"The spread between wholesale and retail mortgage rates has never been higher (in absolute and ratio terms) providing a new ATM for all those banks and mortgage originators trying so hard to scrape by these days."
http://www.zerohedge.com/news/2012-10-01/feds-trickle-down-policy-lines-pockets-mortgage-originators
Woonded (all),
Seems to me the stronger political case might be made that the GSEs are of systemic importance and they truly only need Congressional risk reform (appropriate levels of underwriting and loss reserves).
Additionally, the ability to borrow from the World at near risk free rates (an open line of credit that no one else on Earth can tap). To shut that off does not seem like appropriate leadership.
I wonder if Milstein has the same thoughts? And if he'd share them.
Full disclosure, I read this on http://www.kattenlaw.com/lehman-brothers-debtors/ and I'm thinking what does this mean for the Assets under management in LAMCO (~47B)? See below in quotes:
"One of the more controversial features of the joint plan is the treatment of guarantee claims against LBHI. The plan essentially caps the amount of allowed guarantee claims by LBHI with respect to each primary obligor. The overall cap for all LBHI guarantee classes is approximately $94.1B. Based on reported statements from Bryan Marsal, this figure seems to be tied into LBHI’s view of its overall worldwide guarantee liability, although how the figure was derived is unclear. To illustrate how the cap mechanism would work, LBHI guarantee claims of Lehman Brothers Special Finance Inc. (LBSF) obligations are placed in their own class and are capped at approximately $15.8B. If it turned out, for example, that aggregate allowed guarantee claims against LBSF were $31.6B (twice the cap), every allowed LBHI guarantee claim of an LBSF obligation would only be allowed at 50% of its allowed face amount against LBSF for purposes of sharing in LBHI’s Available Cash. Thus, a creditor with an allowed claim against LBSF of $20 million would only have an allowed guarantee claim against LBHI of $10 million. In the unlikely event that the joint plan overestimates the aggregate allowed guarantee claims (i.e., all allowed LBHI guarantee claims are less than the $94.1B total cap), the surplus would be shared among classes of LBHI guarantee claims where there was a shortfall, pro rata, based on the ratio of a class’s particular shortfall to the aggregate amount of all guarantee class shortfalls.
In recognition that it could take years to resolve all of the LBHI guarantee claims, the advantage to this approach is that it allows LBHI to more easily reserve a maximum amount of Available Cash attributable to guarantee claims and begin to make payments in respect of other allowed, undisputed claims against LBHI (e.g., bond claims) without first resolving all or most of the guarantee claims. The disadvantage is that for creditors in guarantee classes where the cap is below the allowed amount of allowed guarantee claims in the class, those claims will get a smaller distribution than other unsecured claims against LBHI without any meaningful legal basis for the discriminatory treatment.
Also potentially controversial is a cap on LBHI guarantee claims of affiliates that are capped at approximately $21.2B. The plan proposes to negotiate with affiliates and make an allocation proposal within six months of the plan’s effective date. If the affiliates vote to accept the allocation by plan-voting majorities (2/3 in amount and majority in number), all affiliates will be bound to the allocation. If not, the bankruptcy court will be asked to allocate the $21.2B. Like the treatment of guarantee claims of non-affiliates, this treatment results in a lesser payment to affiliates holding guarantee claims if the total allowed affiliate guarantees exceed $21.2B."
Cotton,
Check out the Assets Under Management listed for LAMCO (47.7B). Is this the residual amount that you have parsed out?
http://investment-advisors.findthebest.com/l/23524/Lamco-Llc
"Lamco Llc is a financial investment advisory firm headquartered in New York, New York. The firm manages 1 accounts totaling an estimated $47.7 Billion of assets under management."
Strange when I click on lamcollc.com...access denied!
rros,
I'm keeping an eye on the volume as part of the larger picture with what happened from TSY performing the profit sweep arrangement. So far the volume has not shown conviction selling (large volume has not traded hands).
I agree with your point that a political assessment is a constant as well
I sent mine into Computershare. Also, the CTs are classified as preferreds. They are just not in the OBS.
Was searching online for Lehman news and ran across this bankruptcy attorney advisory re: Lehman.
http://www.kattenlaw.com/lehman-brothers-debtors/
Somebody spent over $2.1M on these shares. I took a quick look at higher volume days over the past 4 years and they tend to happen prior to share price increases.
~$2.1M for ~$127.5M in face value.
Realize that someone also sold these. Anyway this is likely not a small trader taking either side of this trade.
Higher volume on the 100K FNMFO pref. 1215 shares traded today...I own a few and usually only see 1 or 2 per week trade hands.
5.375% Non-Cumulative Convertible Series 2004-1 Preferred Stock, liquidation preference $100,000 per share FNMFO
Did the 3 years start in 2008 or when the OBS was created?
What is the duration on the NOL order (change of ownership restrictions)?
Reason I ask, can they lock up equity to the end of the wind down and then finally file chap 7?
Was searching around on the web and ran across a presentation by Wilmingtontrust in 2008.
Link
insert-text-here
Interesting they had 15% of thier portfolio in trust prefs. See page 8, 9, 10. Also, they noted unrealized losses (hanging on at that point).
4cents, I agree fully...Tsy just wants thier money back with some return would be better. Tsy also knows that timing the release from c-ship is key as well (needs to be done when private lending is happening on a larger % basis). I also agree this new arrangement strengthens F&F chance of survival and allows F&F to payback at a faster pace.
The wind down will logically happen as they raise g-fees to make private lenders able to compete. At the end, F&F will be a smaller player in the mortgage market. They will also be healthy and out of conservatorship.
I'm holding and planning for more volitility.
Cotton,
I posted this awhile ago. Do you understand what amount the pro rata language in the POR represents?
Reading over the POR for the 10th or greater time -
On pg 81 (it looks like our re-distro to higher classes were capped at what our pro rata share would have been). Wasn't the orig pro rata amount ~7% of FV for class 10A,B,C? I could be reading this incorrectly or have the amt (~7%) wrong. Or is it the full amount of these classes ~15B?
Heres the specific section(s)-
6.4 Redistribution of Subordinated Claims Recoveries. To give effect to agreements of holders of Subordinated Claims, all Distributions under the Plan made by LBHI shall be
calculated as if each holder of an Allowed Claim in LBHI Class 10A, LBHI Class 10B and LBHI Class 10C were to receive its Pro Rata Share of Available Cash from LBHI, and, in the case of
each holder of an Allowed Claim in LBHI Class 10A and LBHI Class 10B, its Pro Rata Share of the Subordinated Class 10C Distribution; provided, however, that:
Section 4.3 LBHI Class 3 – Senior Unsecured Claims against LBHI.
(a) Impairment and Voting. LBHI Class 3 is impaired by the Plan. Each holder of an Allowed Claim in LBHI Class 3 is entitled to vote to accept or reject the Plan.
(b) Distributions. Each holder of an Allowed Claim in LBHI Class 3 shall receive its Pro Rata Share of (i) Available Cash from LBHI, (ii) Subordinated Class 10A
Distribution, (iii) Subordinated Class 10B Distribution, (iv) Subordinated Class 10C Distribution
and (v) the Plan Adjustment.
None of the CTS were issued after Apr 2005 see below:
LEHKQ - IPO - 3/14/2003 - 12.00 Million Shares @ $25.00/share
LEHLQ - IPO - 10/14/2003 - 12.00 Million Shares @ $25.00/share.
LHHMQ - IPO - 4/6/2004 - 16.00 Million Shares @ $25.00/share
LEHNQ - IPO - 1/7/2005 - 8.00 Million Shares @ $25.00/share
Just ran across this on the LBHI website, under key documents, then responses to questions-
http://dm.epiq11.com/LBH/Document#maxPerPage=25&page=1
Responses to Questions Submitted 8-4-2012
Responses To Questions Received Regarding
(1) 2012+ Cash Flow Estimates,
(2) Balance Sheets as of March 31, 2012, and
(3) June 2012 Post-Effective Operating Report
08/04/2012
Page 1 of 1 (1 items)<<<1>>>
Have not read it yet, sharing in case anyone else has not read it.
The rank of the CTs in relation to equity are found in the prospectus for each
They rank on parity to the most SR preferred and SR to common
Understand your points, but Lehman is far from the typical BK.
http://www.marketwatch.com/story/lehman-creditors-want-rivals-to-reveal-holdings-2011-05-24
Would have loved to been a fly on the wall at these negotiations and be privy to all the non-public information these parties had access to.
Hopeful the large banks aligned with getting a much greater return on their lower class holdings at a later date.
Again, can't wait to see what develops end of Sept/Oct. Either way locked up until this is final.
GLTA
Remember, the vulture hedge funds were forced to submit to Peck and Lehman during the POR approval process when they bought thier debt and for how much (this was VERY unusual in BK). IMO, this is ultimately why they agreed to a capped recovery and the siphoning of lower classes $$ to higher classes was capped as well. It would not have been equitable.
Can't wait for end of Sept/early Oct. GLTA
Taking a second look at the post confirmation oper report.
Sources of cash
Receipts from Affiliates = 7.247B
Didn't the article re LAMCO est LAMCO generating ~$8B annually?
Very last doc in the MOR section, title "APRIL 2012 POST-EFFECTIVE OPERATING REPORT."
insert-text-here
What is the consensus on the board?
1. IPO remaining assets and NOLs for Sept distro (market valuation)
2. Distro on only available cash in Sept.?
3. Other?
I have not heard of anyone commanding more earnings in new jobs post crises. The earnings shift has been downward. I know a number of Attorneys and MBAs taking admin or sales jobs just to make ends meet. Also,have seen a huge number of college grads unemployed. Hopefully you find something that is rewarding in addition to watching the kids, kids (LOL).
Hopeful we end up with some $$$ here.
Best JW. GLTA (of Us)