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I'm not sure, but probably closer to the GUAP if I had to guess.
Either way, did you follow what I was trying to figure out?
Let's say a company enters bankruptcy with $90B in assets, $20B in NOLs, and $100B debt. If they liquidate the $90B in assets for $10B to pay the creditors what they can, does the $80B (90-10) loss get added to the NOLs, making the total NOLs $100B?
At that point if there is COD of $90B in the end, the debtor would still have $10B (100-90) left in NOLs, assuming the NOLs are reduced by the amount of COD.
Obviously oversimplifying the complexity of what's happening in the bankruptcy, but there should be a clear yes or no answer to the question...or not!
Can anyone say for certain just how much NOLs there are at this point? As assets, businesses, real estate, investments, etc have been liquidated over the last 6+ years, wouldn't the NOLs increase as losses are booked because of liquidation/fire sale prices?
If Lehman started out this process with over $600B in assets, and those assets have been sold at much-reduced prices, wouldn't that mean losses would be added to the NOLs, possibly to the extent of offsetting a huge chunk of the liabilities subject to compromise, assuming the NOLs are reduced by COD that is...
Bottom line question, can NOLs in increase during bankruptcy because of liquidation pricing?
I'm happy to agree to disagree. One day this has to end and we'll see how it turns out. The glass is half-full optimist in me thinks we still got a shot at a payout of some sort. It's TOO BIG TO GO POOF IMO...
That wouldn't surprise me, and I hope that's the case!
You know if the CTs end up getting a payout in the end, I wouldn't be surprised if the naysayers still end up thinking they were victorious just because they had a few good arguments made along the way why they shouldn't have gotten paid!
I could actually see that happening LOL!
Yesterday 2/21/15 was the deadline for transfers for the upcoming April distribution. I noticed the massive # also...
I acknowledge the whole balance sheet, even the parts like the following, which you seem to ignore for some reason:
(1) Balances for Debtors do not reflect the impact of eliminations of intercompany balances and investments in subsidiaries.
and
The Balance Sheets:
• are not prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”);
.
.
• do not reflect certain off-balance sheet commitments, including, but not limited to, those relating to real estate and private equity partnerships, made by the Company;
.
.
• include certain items that remain under continuing review by the Company and may be accounted for differently in future Balance Sheets.
"Estimates are based on available information and judgment. Therefore, actual results could differ from estimates and may have a material effect on the Balance Sheets. As more information becomes available to the Company, including the outcome of various negotiations and litigations, the Company may revise estimates accordingly."
Joe, what does the wording "net of" mean to you? My understanding is that it means "minus" when it comes to accounting.
So the sentence could/should be read as:
As of October 2, 2014, Liabilities Subject to Compromise were estimated at approximately $243 billion, minus distributions and other reductions.
Just what are those other reductions, and exactly how much were they and are they going to be?
That goes both ways my friend. You're welcome to think inside the box if you want, but I choose to think more on what's on the outside. The biggest bankruptcy in history just may have some surprises that the box can't contain!
One day we'll know for sure who was right. No guarantees at this point that it's you!
The new owner can't declare the loss, but maybe the original owner who paid the original $1 could? If so, that capital loss would have been declared for the tax year they sold the original claim. Just my thoughts, but absolutely not an expert on the subject!
In the case of bonds, I don't believe those capital losses by the original bond holder can be subtracted from the LBHI NOLs though.
The new securities issued would be for a going concern in my opinion. A going concern has to include the CTs, again in my opinion. That is a path to reorganization, even if the words are used in the plan.
What if there was an agenda to reorganize that they didn't want or need to spell out in a definitive way that it was their intent? At the time the POR was written, maybe it was safer to focus on the liquidation aspects, but leave the door wide open for the real plan. I wouldn't put that past them for a second. And IMO it would be perfectly legal too...
I agree that a liquidating trust would not have any intention to engage in a going concern business. I just happen to believe that Lehman Brothers includes a lot more (think massive) than just the liquidating trust.
LBHI has invested 10's of Billions in affiliates. LBHI owns all the equity in the affiliates. The balance sheet is not telling the whole story and doesn't claim to.
I am still very optimistic, but understand that folks still have every right to see the glass as half empty if the focus is just on the balance sheet, you know the one that has plenty of qualifiers as to how much it should be trusted for accuracy...
That's a good question. My first thought would be that the claim still hasn't been satisfied just because it's been transferred. I would think the only claims that have been satisfied up to this point would be the ones that were settled based on an stipulation/agreement of some sort. That would include the ones < $200M that would not have needed court approval. The balance sheet doesn't tell the whole story and doesn't even claim to as far as what's left to be paid. I still believe there's a bigger plan unfolding that will be so good that none of the creditors would object to it.
Sorry again Joe,but I think it would be perfectly acceptable, normal, and non-stretching to call 15.2 part of a reorganization plan within the POR. Let's not forget what POR stands for..."PLAN OF REORGANIZATION". It makes perfect sense, and I also don't buy it that the debtor just chose the term POR in a generic, default, type of way.
I think it would be more of a stretch to say it's not a reorganization plan. Don't you see that your statement below sounds a bit contradictory, even a little bizarre?
You said:
"I think it is quite a stretch to call this a reorganizational plan within the POR"
Sorry Joe, but that doesn't make sense to me. I do appreciate the response though.
Why would the debtor issue new shares for the assets transferred to an existing or new entity or entities, if the end result is just going to be a liquidation? IMO this is just describing the possible way forward as a going concern. It's a perfect description of how it would happen.
And as you might know, a going concern cannot go without the CTs. And any payout to the OBS also has to meant a payout to the CTs. I think you even agreed to that part a while back if I'm not mistaken...
OK - I am interested in what you have to say.
Creditors owning the NOLs? My understanding is that the NOLs are non-transferable plain and simple...
My question remains, wouldn't the issue of new shares for assets in a new entity as described in The Plan, be considered something other than a liquidation, and along the lines of a reorg of some sort?
Whether or not the CTs make the cut, or if the creditors are satisfied in full is still questionable and is a different discussion...
Joe - you can believe that the gap is too great for the reorg to happen with the new shares, but can't you at least humble yourself a bit and agree that what I described would be a type of reorg and not a liquidation?
I do agree that the word reorganization isn't mentioned in the plan.
C'mon Joe, you can do it!
The Plan states they can create a new entity and then issue new securities to debt and equity holders.
You would agree wouldn't you that they may do this? It's clearly described in the plan as a possibility. Or can you say with 100% certainty that is not going to happen?
I would describe this as a type of reorganization! It sure isn't part of a total liquidation, wouldn't you agree?
Maybe it was put in the plan...because it is their plan! I for one am willing to take a bet that it might happen, but can't say 100% for sure that it is going to happen...
If this isn't a type of reorganization, then you must believe that the assets that are transferred to the new (or existing) entity(s) are then going to be liquidated, making the new securities they just issued worthless. That makes no sense, so it obviously means something other than a liquidation, correct?
There it is, in black and white, a reorg strategy described in the Plan...
15.2 Issuance of New Securities. In the discretion of the Plan
Administrator, each Debtor or Debtor Controlled-Entity (a) may form and transfer certain assets of the Debtors and/or Debtor Controlled Entities to new (or utilize existing) entities, including, without limitation, one or more separately managed partnerships, REITs or other investment vehicles, to hold certain real estate or other assets of the Debtors and/or Debtor-Controlled Entities and, (b) may, in connection therewith, issue New Securities for Distribution under the Plan. In the event that the Plan Administrator determines to issue New Securities, each holder of Allowed Claims or Equity Interests against a Debtor that contributed assets to the entity issuing New Securities shall receive the relevant New Securities as Distributions in accordance with the Plan. The New Securities shall be valued as of the date of the issuance and the holders of Allowed Claims or Equity Interests receiving such New Securities shall be deemed satisfied to the extent of the value of the New Securities.
There is a bankruptcy plan called a POL (Plan of Liquidation). I wonder why that term wasn't used if they were planning to liquidate EVERY asset owned by Lehman Brothers (and all the subs and affiliates) down to the last office chair. But instead they are using the term POR, which indicates some form of reorganization.
I'm not basing everything on just the title of "the plan", but it seems to be very intentional that they chose to call it a POR and not a POL doesn't it?
If the plan is to liquidate just some of the specific assets (those in the liquidating trust), and hold onto the rest as a going concern, then that would be fine by me!
My thought was that the sub-debt holding Delaware Trust (not capital trust/preferred shares) could declare a loss as a business, maybe it would be considered an operating loss NOL???
And then those NOLs of $1.2B (or more) could be used for a merger of some sort.
I wasn't referring to the capital gains type of loss that the individual investors like me could claim if it ever gets to that point.
If that's true Joe, then wouldn't that also mean that the losses by any bond holder type of creditor (like Wilmington Trust) wouldn't affect the NOLs because of COD?
The trust is an independent entity from LBHI. Is it possible that it could continue on (possibly reverse merge) and make use of the $1.2B in NOLs, if it turns out they have that much of a loss to claim?
The real $$$ value might be 35% of the NOLs, but I'm good with that!
Has anyone heard of this happening before? I hadn't thought of it until I saw the last few posts...
Can anyone make a good argument this time around why the CTs will see something in the 7th distribution? My thought is that if we didn't see anything in the 6th, there's no reason we will in the 7th.
I'm all ears though if someone sees it differently though...
On a side note, LBI is getting ready to make one of their distributions (2nd?) and LBHI has a claim against LBI for $1.5B I think. That ties back into the JPM subrogated claim that LBHI now has against LBI. And that ties into the CDA from way back when. Maybe the CTs still have a link to that agreement...or not?
OK - so in your example, you have no debt, you don't owe anybody anything, right?
But you still own the $1000 in supplies free and clear! Sounds like equity to me!
The provider is satisfied, the bank is satisfied, the IRS is satisfied, and you have $1000 in product left.
Now let's say that product was purchased at a DEEP discount (20%). You may be able to liquidate that $5K worth of product for $2K and history would show that you were liquid all along.
I actually like your example better than mine!
The idea that a bank loan that didn't contribute directly (indirectly perhaps though) to a loss in an earlier year, can subtract from NOLs going forward doesn't make sense to me. That would mean possibly a double whammy against NOLs, one hit from the bank loan settlement, and one hit from the provider of goods, whose goods you purchased using the bank's loan. That really doesn't make sense to me! Single whammy, sure, but not a double whammy!
The current bond holder type creditors (class 3?) IMO would be treated the same as the bank loan in my example. The creditor's loss from the negotiated settlement wouldn't be counted as COD income to the debtor, unless the total sales of those bonds were treated as an expense (contributing to NOLs) in the year they were sold. That probably didn't happen though.
However, I could see how the amount paid in dividends each year could have contributed to the NOLs, but that's in the past. Those dividends were paid, and are not being negotiated. The expense already happened. The future payments still due to the creditors, and being negotiated, never would have contributed to the earlier years' losses, so they shouldn't reduce NOLs.
Doesn't the idea behind COD reducing NOLs mean that a company is cancelling debt that was reported in an earlier year as an expense (contributing to a loss), but that debt (or a portion of it) was negotiated and settled for less? That actually does make sense, and can understand why the IRS would demand it.
Again, only cancelled debt that was listed as an expense or liability in an earlier year where the debtor had a loss, should be used to reduce NOLs going forward IMO...
Concerning the whole NOLs/COD issue, I wonder if it's as "simple" as this, since it sort of makes sense (to me at least):
Let's say a debt of $100K was negotiated and settled for $25K during bankruptcy.
If that original $100K debt was used years earlier to increase that year's loss (part of NOLs), then the NOLs going forward should be reduced by $75K (the negotiated amount not paid on the debt).
However, if the $100K wasn't an "expense" (years earlier), but more of a loan, then the $100K wouldn't have been part of the NOLs. Therefore, the $75K wouldn't have to be subtracted from the NOLs going forward.
If I have a business that takes out a loan for $100K from a bank, I might report the interest on that loan as an expense, but I wouldn't claim the actual $100K loan as an expense, correct? But if I used the $100K to buy product or pay employees, then the cost of the product and the cost of the employees would be expenses that contributed to the loss, but not the actual loan of $100K.
Then, in bankruptcy, if I negotiate with the bank to settle the loan for $25K, the $75K hit the bank took would not have to reduce my NOLs going forward since it was never an expense that contributed to my earlier loss.
So IMO it may just have to do with the type of debt that is being negotiated for less, in order to completely satisfy the creditor and settle the claim. If it was an expense that increased a previous loss, then yes, the NOLs should be reduced. But if it wasn't an expense contributing to a loss, then no need to reduce the NOLs.
If the negotiation is between the debtor and the loan provider, no reduction of NOLs should occur. But if negotiating the debt with the employee's wages or the provider of the goods purchased, then the NOLs can be reduced IMO.
Again, it makes sense to me, but not sure if represents reality. My guess is that it doesn't...
The CTs prospectus states that equity-based stock (OBS) will not receive any payment unless the CTs are satisfied, including back interest. I also own preferred shares that are in the OBS, so I'm rooting for the OBS to make out huge also!
There are a LOT of equity holders that are ex-Lehman employees/directors who own RSU (restricted stock units, also in the OBS). If they get anything, which I am also rooting for, then the CTs would have been made whole by that point, or at least been made an offer for redemption IMO...
Good luck to you/us!
And then there's that $44B investment in affiliates I'm sure they haven't forgotten about, plus profits of course!
Largest bankruptcy in history happening over the course of a weekend, well over $600B in assets, LOTS of withdrawn claims, LOTS of expunged claims, LOTS of settled claims, LOTS of investments in affiliates, LOTS of potential profit on those investments, LOTS of intercomany debt that can be cancelled, LOTS of NOLs, LOTS of reasons to merge into a going concern...
equals reason enough for me to think outside the box a little. Stay inside the box (or at least act like you are) if you want, more power to ya!
You aren't getting any of my shares!
Did you see me say anything about cooking any books???? The answer is I didn't. You're the only one here accusing them of that...
I'm just repeating what the balance sheets actually say. You know, things like:
The Balance Sheets:
• are not prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”);
• do not reflect normal period-end adjustments, including accruals, which were generally recorded by the Company prior to the
filing of the Chapter 11 cases upon review of major accounts as of the end of each quarterly and annual accounting period;
• do not include explanatory footnotes and other disclosures required under GAAP and are not presented in a GAAP-based SEC
reporting format. Certain classifications utilized in the Balance Sheets differ from prior report classifications; accordingly
amounts may not be comparable;
• do not reflect certain off-balance sheet commitments, including, but not limited to, those relating to real estate and private equity
partnerships, made by the Company;
• are not audited;
• contain forward-looking statements that involve known and unknown risks, uncertainties and other factors which may cause the
Company’s actual results, performance or achievements to be materially different from any future results, performance or
achievements expressed or implied by these forward-looking statements. Accordingly, the financial information herein is subject
to change and any such change may be material;
• include certain items that remain under continuing review by the Company and may be accounted for differently in future Balance
Sheets.
and
Note 2 – Use of Estimates
In preparing the Balance Sheets, the Company makes various estimates that affect reported amounts and disclosures. Broadly, those
estimates are used in determining expected recoverable amounts of certain financial instruments and other assets and establishing
claims amounts and various reserves.
Estimates are based on available information and judgment. Therefore, actual results could differ from estimates and may have a
material effect on the Balance Sheets. As more information becomes available to the Company, including the outcome of various
negotiations and litigations, the Company may revise estimates accordingly.
and
"Adjustments to Investments in Affiliates may be required in future Balance Sheets
(including write-downs and write-offs), as amounts ultimately realized may vary materially from amounts reflected on the Balance
Sheets."
and
"The Balance Sheets do not reflect potential realization or collectability reserves on the Due from Affiliates or an estimate of potential
additional payables to Affiliates. As a result, adjustments (including write-downs and write-offs) to Due from/to Affiliates may be
recorded in future Balance Sheets."
and
"(1) "Due to" balances with Controlled Affiliates are reflected in Liabilities Subject to Compromise on the June 30, 2014 Balance
Sheets." ---- Why bother paying anything to the affiliates if they are ALL (supposedly) in bankruptcy. If they're not all in bankruptcy, then who owns the equity in the non-bankrupt affiliates (hint LBHI).
Tell us how much is left to be paid to the creditors as of today when you get a chance. You know after all the settlements, withdrawn claims, and expunged claims. You don't know, just admit it!
Still too many unknowns, even with the balance sheets. They don't even claim to be 100% accurate. You still can't say how much is owed to the creditors (as of today) and what the impact of the 10's of billions of investments in the affiliates has been or will be. It is intentionally left off the LBHI balance sheets, but is reported on the other debtor's. These always show a decrease in liabilities and an increase in assets.
You need to think outside the box a little more Joe....
But Joe, you haven't answered the questions about how much is left to pay the creditors to satisfy them, or how much LBHI has invested in the affiliates including profit they have and are making.
You argument for the CTs not getting paid is so POoR!
In your opinion what does the R in POR stand for, REGRET or REORGANIZATION? It's not really your opinion that matters anyway though...
You're wrong about the total liquidation, turn out the lights, don't let the door hit ya in the butt, Joe.
Time will tell that we are right on this!
LBHI owns all the equity in the subs. LBHI has invested a ton in the subs and I'm sure making good profit on those investments.
How much exactly (even +/- a few billion) is left to be paid to the creditors today, taking into account the withdrawn and expunged claims, as well as those settled <$200M over the last 3-5 years? You can't really say can you?
The CTs are in great shape!
Agreed toogood, concerning it happening all the time. Here's a recent example:
Claim #66365 was just withdrawn yesterday according to docket #47989. The claim was for $1.5M, which included a guaranteed portion of only $10K for services performed, and the remaining $1.49M was for a possible bonus (according to the details in claim #27171, the original claim).
The stiplation that was approved (ordered) causing the claim to be withdrawn may have been for a LOT less than $1.5M, and possibly just for the guaranteed $10K.
In either case, the claim for $1.5M has been withdrawn and is off the books...
Hey jimmyt,
The investment in affiliates is a growing asset IMO, but was taken off the LBHI balance sheet.
Affiliates across the pond perhaps?
And who can say how much in off-balance-sheet assets there really are?
And lastly, nobody on this board knows how much is left to satisfy the creditors IMO.
We are in good shape IMO!
All the best to you too, sir!
I guess so, but at least they're stating pretty clearly that the balance sheets aren't meant to show the entire picture of what's going on. Seems fine by me as long as they state it clearly...
I get your drift, but still believe nobody will be able to tell you what you say you need to hear.
What is the value of a future business with no debt, $55B in NOLs, and ownership by old creditors/equity?
They don't necessarily need to have assets > liabilities to totally exit BK and carry on as an ongoing concern. IF, I say IF, that happens, the CTs at least will be rewarded according to the prospectus. Yes, the prospectus does mention what will happen if there is an ongoing concern, and it's a good thing!
I've never personally said OBS is golden, but I also haven't wasted any time trying to argue that they aren't. If the OBS gets even one cent per, the CTs must have been taken care of for that to happen.
And by the way, I do own quite of bit of the preferreds in the OBS, as part of the gamble I was willing to make. I hope you are made whole in your investment BTW!
Thanks Jersey. These sort of investments are for the type of folks who are willing to take a risk. Some folks probably are out of their league here and should focus on safer low-risk investments. To base everything on what the balance sheets report, when they're telling us clearly THEY ARE NOT TELLING US EVERYTHING, is not thinking outside the box IMO. It may not even qualify for thinking inside the box either!
Who can say for sure how much is still to be paid to the creditors so that they are satisfied in full, when a LOT of compromises have been agreed to and claims withdrawn? The answer is nobody!
Who can say for certain what the effect of those investments in the subs are, when they are intentionally keeping it off the balance sheet for LBHI? The answer is nobody! The other debtors show it, and it means increased assets and decreased liabilities. Again, why aren't they reporting it???
And again, who knows how many claims <$200M are now off the books compared to Mar 2012? The answer is nobody!
Yep - I'm willing to take the gamble and have all the bets made, just like yourself.
Enjoy that snow today and be safe!
Concerning the balance sheets, what's your opinion on the statements it makes, specifically:
(1) Balances for Debtors do not reflect the impact of eliminations of intercompany balances and investments in subsidiaries.
and
The Balance Sheets:
• are not prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”);
.
.
• do not reflect certain off-balance sheet commitments, including, but not limited to, those relating to real estate and private equity partnerships, made by the Company;
.
.
• include certain items that remain under continuing review by the Company and may be accounted for differently in future Balance Sheets.
"Estimates are based on available information and judgment. Therefore, actual results could differ from estimates and may have a material effect on the Balance Sheets. As more information becomes available to the Company, including the outcome of various negotiations and litigations, the Company may revise estimates accordingly."
On the balance sheets for some of the other Debtors and Debtor-Controlled Entities they ARE showing the impact of the eliminations of intercompany balances and investments in subsidiaries, and they increase assets and decrease liabilities!
Are you basing everything on what the balance sheets show, all while they don't claim to tell us everything? Can't you see the possibility for a continued business at some point????
My guess is a reorganization with an ongoing business, yet to be finalized. It will happen when the remaining debt left to be paid will be enough to be written off by the capitalization of the new company, combined with the value of the NOLs.
Concerning the debt left to be paid, we don't know how many claims <$200M have been taken care of and withdrawn. Claims under $200M don't need a judge's approval for settlement.
The balance sheets aren't telling the whole story IMO, and it doesn't even claim to.
The Balance Sheets:
• are not prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”);
.
.
• do not reflect certain off-balance sheet commitments, including, but not limited to, those relating to real estate and private equity partnerships, made by the Company;
.
.
• include certain items that remain under continuing review by the Company and may be accounted for differently in future Balance Sheets.
"Estimates are based on available information and judgment. Therefore, actual results could differ from estimates and may have a material effect on the Balance Sheets. As more information becomes available to the Company, including the outcome of various negotiations and litigations, the Company may revise estimates accordingly."
Also on the balance sheets for some of the other Debtors and Debtor-Controlled Entities they ARE showing the impact of the eliminations of intercompany balances and investments in subsidiaries, and they increase assets and decrease liabilities!
But for LBHI they are not showing the effect:
(1) Balances for Debtors do not reflect the impact of eliminations of intercompany balances and investments in subsidiaries.
I am just being MUCH more patient now with a reasonable expectation that we will see the plan for a new surviving business announced this calendar year sometime...
Correct robigus, the objection is just for a portion of claim #66455, as mentioned in the footnote for that claim (towards the bottom of docket #47715)
3 JPMORGAN CHASE
BANK, N.A.
08-13888
(SCC)
Lehman Brothers
Special Financing Inc.
04/01/2010
66455
This Objection applies solely to those portions of claim number 66455 that relate to Post-Petition Legal Expenses, Post-Petition Service Fees and Pre-Petition Billed and Unbilled Fees.