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jersey & swiss,
It is one way of moving this forward and seems that is in the direction of the POR, Courts and hired re-structuring groups.
If the restructuring moves forward with $112.8B in NOLs, the $11.139B of CTs & Preferreds FV and cumulative payments is covered by the tax impound account.
These equity obligations can be likely restructured at lower rates, if necessary. Debtholders have not stepped forward with additional financing. GS has sold $628M+ of their claims as documented in the Dockets. Citi has been transferring claims.
So, why keep them in the deal? I think a lot of this was bought back by the Estate for pennies anyway.
That would leave the unpaid, non-discharged old debt positions, common and $260M Court-approved ESOP payment with possible other charges to represent ownership in a new Holding Company at the discretion of the Court.
The profitable subsidiaries can move forward with proposals to control the Holding Company, too, especially as the Aurora operations and other more "spurious" operations are contained and settled.
Why involve other financials? It seems JPM & BNYM can solve these restructuring issues with resources if they see fit or the Estate can move it overseas with Barclays or Deutsche Bank and consolidate the tax impound account benefits from the NOLs stateside before eventually moving the Holding Company overseas.
IMO.
GL
No CDO, swiss.
Estate requested IRS to sign off on it.
So, they'll max the NOLs at discharge.
Why keep the CTs & Preferreds if they can get paid off with a lot less debt to pay back?
mojo
Actually, NOL of $112.8B using joe's numbers.
That $260M is 2.07% of the debtholder & common shareholders 49% share of $105B of NOLs after discharge.
Or, 27.9% of the common shareholders claim.
Why shouldn't they take stock in a new Holding Company after discharge?
mojo
Nothing filed yet, Nella.
It isn't unusual for them to take a few days to file.
You know, double check the spell check and grammar tense.
Maybe the attorneys all got together and played hearts because they don't have any friends at home.
mojo
If that is the case, cotton, the Southern District Court will have to provide restitution.
I'm glad we have an attorney like you following these filings closely.
IMO, it is also part of the function of these trusts, too.
Good luck!
I don't blame Rex & Dan for trying.
Lehman has been with a re-structuring firm and WGM since the BK beginning when the 5 year Deferment Period initiated.
Marsal said it would be over in 2 years and it's still in administration.
Since the POR was authorized in 2011, they've had the stays to do what they want to do, including not honoring Corporate Guarantees and Deferment Clauses in shareholder agreements.
They file their papers in the Southern District Court and get what they can get while they trade what they trade.
What are we supposed to do?
When the Courts and the Lawyers have settled what they're supposed to settle, we will live with the results.
mojo
joe,
Applying your numbers to the financial model we get $112.8B in NOLs as we follow the Court instructions of buying down the claims and the Estate request to the IRS to refuse COD interests for claims.
This would secure $11.6B credit interest for Debt Holders in a new Holding Company containing the subsidiaries through the 49% tax impound account share.
Additionally, the 689M Common position would have an interest of $1.35 a share out of the 51% tax impound account share, 8% of the nominal share amount.
CTs and Preferreds would be made whole.
The attorneys have their reasons to file the statements and papers they file in Court that you quote with glee, understanding equity was assumed to reject the plan rather than arguing for subordinated positions including the CTs.
There has never been, however, a reasonable explanation as to where $130B+/- in collateral has gone making the shortfall.
And, the shares continue to trade on the open market making for more potential liability.
mojo
It's a process statement not a probability statement.
It looks like they'd need to increase the NOLs to $105B from $55B out of the remaining $130B Claims Subject to Compromise.
After they pay off the CTs and OBS, that would allocate $0.25/share for the commons out of a new Holding Company.
Good luck.
<<Of course we know now that the bankruptcy could have been avoided if the US TReasury would have stepped in as they did with AIG.>>
Every Financial not standing at the FED window or hooking up with Buffet was estimated to go bankrupt.
Paulson voted to approve GS.
ML hooked up with BAC.
JPM & Citi would have been taken down if they weren't lobbying with the Feds while sitting at the discount window, if not misrepresenting billions of deposits in Court.
GL
There are reasons for that.
JOVI,
It's been 11 years.
11 years of paying legal & restructuring fees.
11 years of paying distributions, many of which have gone to claims that were not guaranteed payment ahead of subordinated issues.
11 years of defaults on notes with corporate guarantees and extended stays to overlook arranged deferment periods.
Why should the remaining creditor list include LBHI competitors who extorted & looted Lehman, it's subsidiaries and investors and lobbied the Government to hang them out to dry?
Fuld could have been fired by approaching the Board and requesting a change in management and all of them know this.
Instead, the more hell they could create in the markets while they stood at the Fed Discount Window with their hands out while re-writing their underwriting requirements worked out for them and their bonuses and stock prices.
And, they took cybercurrency, cannabis and total crap, fraudulent app companies public losing billions while screwing over their commitments and hiring foreign nationals.
Outrageous.
mojo
Lastly, my model shows the ratios of CT-Cumulative-Noncumulative-Common at $130B NOL are 15%-11%-55%-21% respectively from the 51% Equity share.
So, before restitution of CTs, the share for commons is 21%.
And, basically, the restitution is required for breaking the deferral period, extended stays and not honoring the Corporate Guarantee.
What more accountability do they need?
What more do they want?
mojo
joe,
Say the LBHI Holding liquidates to cash balances, including unpaid taxes, without any other assets on their balance sheet.
<<How can it be more clear that this is a total liquidation?>>
They still have residual interests in the subsidiaries and these balances and valuations cannot be funneled up to the existing Holding Co.
The subs had nothing to do with any mismanagement of the LBHI Holding Co. or US Government.
Christine Lagarde at the IMF rebuked Bush & the US Treasury specifically regarding this fact and the obligations that remained overseas for Lehman and it's investors.
But, they can be credited into another Holding Company.
The question is, "What is it worth to the sub to take this into a new holding company overseas?"
The US Government has stated for 11 years they don't want Lehman.
That doesn't absolve them from damaging Lehman and the business rights of it's creditors and investors Worldwide.
Same with any of Lehman's counter parties or competitors.
mojo
toogood,
Forcing LBHI into bankruptcy by the US Treasury changed the rules.
LBHI couldn't collect on their real estate mortgage positions and they were forced into fire sales on everything else as the market turned up.
Employees were let go and subsidiaries were closed.
Congress changed the rules through Dodd-Frank for CTs.
The US Trustee advocated and approved a POR that changed the rules of prospectus covenants to fit their agenda, depriving the voice of the equity holders.
At $130B of NOLs, Debt Holders would have $13.377B in tax savings and LEHMQ common would have $2.76B in an equity credit or $4 a share in a new holding issue.
This is before restitution for penalties and damages to the CTs is paid.
Question is, "Would Debt Holders and Common pay or credit $1+/- a share for the restitution of CTs if they initiate a new issue overseas and put it all behind them?"
mojo
toogood,
The claim becomes the buyer's or sponsor's.
The Court's preferred method of handling claims approved in the POR is to buy them down on the market and use the NOLs instead of the COD.
Why shouldn't the Senior Debt Claimholders convert to an equity position rather than a COD filing on their taxes?
Some of their instruments were structured for the Bank's more speculative activities that became increasingly political and risky.
And, that exposure remains the reason why the LBHI Holding Company is defunct without a suitor and subs unable to funnel up cash to the holding company balance sheet.
The subordinated notes may have similar problems or be structured to finance subsidiary activities.
All the equity claims financed the general corporate account.
IMHO, the US Government deserves "ZIP" on this: no jobs, no revenues, NOTHING! They financed the competitors and drove one of the best IBs into the grave.
It should go to an overseas sub or sponsor and the equity claims settled out from 51% of the NOL tax impound account; the Government shouldn't collect a dime of it.
If there are $130B in Claims Subject to Compromise, then that is what the NOL should be and those claims should have appropriate ratios with the common interest in a new issue once the equity is cashed out.
Am I wrong?
When is this going to be over?
It's outrageous!
Thanks, swiss.
On page 10 of the Auction Motion, I reviewed this:
"Purchase Price Notice
i. Upon selection of the Sponsor, and not less than two business days prior to the hearing to consider the entry of the Election Order, the Plan Administrator shall file with the Court a supplement providing the following information (the “Purchase Price Notice”):
1. the identity of the Sponsor for each Eligible Class;
2. the Rate for each Eligible Class;
3. any additional documents to be submitted to holders of Eligible Claims in support of the Claims Consolidation Auction or as may be directed by the Court; and
4. a summary of the bidding process"
Why is a "Rate for each Eligible Class" established by the Plan Administrator?
It is clear the CTs trade at established algo minimums for an artificial ceiling.
Now it looks like we have some "Marxist" rate from the Administrator?
Where are the free markets?
Dockets #59958-#59962 represent $628.8M in transferred claims.
They could have been different claims than those identified in the sales memorandum but your $55M number seems low.
zoo,
How much will the new buyer pay?
What exactly will they buy? Have they been buying the claims down like the Judge & Trustee prefer?
How will they compliment the subsidiaries, many of whom have shut their doors?
How much will they credit the remaining Debt claims? Creditor claims?
Did you see my earlier questions on establishing a new Broker-Dealer? What is the incentive?
JPM wanted out of their Broker-Dealer finance facility the way the guarantees were structured; I doubt they want to start it up again with all the overlap from their IB unit.
It is hard for a new entity to get involved and get control without spending billions for Lehman before discharge. They'll likely be in protracted Court settlements if they do.
After discharge, all remaining claims could be consolidated in a new issue.
Why would anyone want to get control of it before then? Including BNYM?
After the claims sale, the hair will be trimmed. After discharge, the hair will be off.
mojo
In the event NOLs are increased to $105B+ from the Claims Subject to Compromise, why shouldn't the Estate cash out the CTs & Preferreds and take the Commons into a new, streamlined Holding Company with the $10.8B+ from the NOL Debt Holder Share and operate the Subs with whatever remains on the Balance Sheet?
FWIW, with an NOL of $105B, it looks like the Commons would be paid $0.25 a share.
It would also mean another $10.8B for Debt Holders.
Or, they restructure it all.
If they loot Lehman and the NOLs, it stays in the Courts forever.
It all has to get approved by the Courts.
Good luck.
fritz,
In the first case, I assumed commons would have nothing.
In the second, I allocated 3% of the 51% equity holder share.
Common share payout may only occur if NOL increases from $55B due to the POR that provided there would be no COD as requested in the letter to the IRS.
In that event, the tax impound account would increase for both Debt & Equity on discharge.
This is what the Claims Sale is all about: Lehman Senior Claim Holders have received distributions on their claims and are selling the remaining position based on what they estimate the discharge value would be. The larger the NOL amount, the more valuable the claim since the COD is not available according to the POR.
There is still a remaining possibility the Debt Holders move on with the subs with 49% of the NOL share after Equity is paid out. And, many of the Debt Holders have purchased discounted Equity positions.
I haven't mentioned one other fact: The $9.73B Preferred FV has increased to approximately $11.139B due to cumulative instruments not being paid. I haven't included any damages or penalties either.
So, it appears the Commons would see a distribution in the event the Court approved an NOL of more than $105B and after all CTs and Preferreds have been paid.
Good luck.
I could add the CTs have 100% of claim while the Preferrds run about 41% of claim in the model.
This is because of the claim class, guarantees and prospectus.
How much each issue gets would take more computation than is necessary.
That is all I'll say about my hypothetical model.
Good luck.
jersey,
The dollar amounts depend on the face value, cumulative status and class claim.
I programmed all that into a spreadsheet and backed out the percentages based on the theory 51% of an NOL tax impound account would preserve a cash balance to go to equity holders upon discharge.
I also had to assume a LIBOR rate for the D's.
There is $9.73B of Preferrds & CT FV. $7.65B is non-cumulative.
mojo
<<So, this way the Debtors get $5.6595B to settle with unless the NOL number is approved by the Courts.>>
Should read:
So, this way the Debtors get $5.6595B to settle with unless an increased $55B+ NOL number is approved by the Courts.
Good luck!
In the POR, the NOLs listed are $55B & there was a letter to the IRS regarding the preference of buying down debt as opposed to COD.
Maybe it could grow if more Liabilities Subject to Compromise are not left for COD.
So, this way the Debtors get $5.6595B to settle with unless the NOL number is approved by the Courts.
Ran a case for Common at 3% which changed the other percentages to 34%, 10% and 53%.
It would also cost me $11k personally but so be it.
Other than the cumulative and non-cumulative covenants, this also assumes each Preferred is of equal priority which may not be the case.
Who knows?
Is liquidation done?
It looks like the NOLs will have the following breakdown after they sell claims by the 28th:
49% for Debt holders.
51% for Equity holders.
Of the 51%, 34% for CTs, 11% for Cumulative Preferred & 55% for Non-Cumulative Preferreds.
This can adjust if there is a common payout.
There are no penalties or damages in this model either and the Court clearly approved accommodations for the DIP.
It could also be adjusted if there is a significant contribution from a profitable Overseas Sub that would assume obligations for US Holding Creditors after they fold.
But, why would they do it?
Lastly, why would a Money Center arrange a new Broker-Dealer Agreement with Lehman remains?
Is there something I don't understand?
Have at it.
Lehman, the Debtors, has both debt holders and equity holders.
Debtors claimed in the POR assumed to be rejected by equity holders, to assume all rights to NOLs.
So, again, they didn't need to form the OBS according to them, yet they did.
They didn't need to trade the CTs according to them, yet they did.
They wanted a looting of Lehman by all the counter parties.
According to you, they wanted to defraud the public.
Even the Judge has stated she doesn't rule in favor of the Trustee all the time.
So, I assume if the Debtors insist on absconding with everything, they will be contested in Court.
Ratios are lower now but 10x seems low with interest rates down and mortgage demand is up.
Reserves are at record highs.
But, look at Lending Club & Marcus, automated, online lending operations.
It could be a way it goes with a lender that can bring in funds when the business is capitalized to make loans.
Or, the tax funds might be higher in another Broker Dealer arrangement.
They have to work it out.
It should have been done years ago.
Doc,
I doubt you stand at the FED Discount Window.
GL
So, 21% on $55B is $11.55B cash tax savings.
And what was the industry trading on cash, 30x or 40x?
Maybe it means $346.5B to $462B to someone that knows what they're doing.
689M LEHMQ common.
So, 311M RSUs?
From where?
Am I understanding GS?
Paulson wants to give GS new Bank standing while denying Lehman the same status.
GS holds onto their Lehman securities for 11 years in BK collecting distributions.
Then, they sell them to a John Mack employer, BKM, out of the Caymans.
Is that it?
Look at #59958, 59959, 59960, 59961, 59962.
GS transferor of $628M+/-.
Are there parties ("sponsors") that can't buy?
Or is it all coming down to price and ability to repay?
We've seen it all, jdub.
We've seen it all.
It should have been done in 2010, the time of the article.
2 more subs exited.
3 more remain.
Could it be done any day? Maybe.
Is it all likely further delayed? Probably.
When it works out, it works out.
At $1.24USD per pound sterling today, we're seeing a US$ payment of $53.8M+.
And, there are claw backs going on.
Can they reduce the foot print and recapitalize?
All subordinated.
None trade.
Can anyone explain why III, IV & V were paid $50M?
Thanks.