Lehman Brothers Financial SA (LEHNQ)

[stockanalyze]

joe, we all know that you are 100% sure that CT's are worthless. You have posted it many times here and at other places. i copied your message here simply to make you believe we have read it and so you know. you can now let us discuss other things related to it.
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Joe Stocks Thursday, 07/05/18 09:13:58 AM
Re: None
Post # 79524 of 79530

My take on the CTs;

1. BNYM is the trustee. Not JPM. JPM sold their corporate trust division to BNYM in 2006. Corporate trust division, not to be confused with their wealth management trust unit. Look who filed the claim against the estate. It was BNYM. The trustee did nothing wrong. They did everything required of them legally under bankruptcy law. Once BK was filed they were stayed from taking any legal action to collect. They filed the claim, and the court ruled it a valid claim and assigned it class 10b status. https://www.businesswire.com/news/home/20060408005021/en/Bank-New-York-Acquire-JPMorgan-Chases-Corporate

2. The most senior preferreds. There is a legal concept that is something is at parity, it is the same. The CTs ARE the most senior preferreds. But as per the prospectus that only applies to ranking. The CTs are senior to common and traditional preferreds, but junior to senior debt as to liquidation.
Prospectus; https://www.sec.gov/Archives/edgar/data/806085/000104746905000357/a2149684z424b2.htm

3. The Trust Preferreds (CTs) are not really a hybrid security – both debt and equity. The CTs are only debt. There is no convertible clause in the prospectus. I challenge anyone to find anything different in the docs. The "hybrid" confusion lies in that the FASB considers them tier one capital, the same as traditional preferreds and common when capital is raised. The reason they are considered tier one on the balance sheet is because dividends can be deferred for up to 5 years and not be in default. The theory is that if an institution gets into financial trouble the 5 years gives them time to cure their problems without having to use cash to payout interest (dividends). As we found during the financial crisis that is not the case. The FASB no longer allows TruPs to be Tier one.

4. On the EPIQ Lehman bankruptcy site the Q&A shows this about the CTs; “Response: The Trust Preferred Securities were issued by the non-Debtor entities identified above (the “Trusts”). Based on relevant prospectuses, the sole assets of the Trusts were certain subordinated debt securities (the “Subordinated Securities”) issued by Lehman Brothers Holdings Inc. (“LBHI”). Under the Plan, claims against LBHI on account of the Subordinated Securities have been classified in LBHI Class 10B. Based on the 2013+ Cash Flow Estimates filed on July 23, 2013 [ECF No. 38954], it is unlikely that the Trusts will receive any Distributions from LBHI on account of their class 10B claims. LBHI is not aware of any other assets currently owned or expected to be realized by the Trusts” http://dm.epiq11.com/#/case/LBH/info
When LBHI filed BK all attempts by debtholders to collect are put on hold. They are 'stayed' from taking judiciary action. The trust then files a claim against the estate, and presents the securities as proof of claim. Once the BK court approves the claim and exits (emerges)from BK the actual subordinated securities and the terms of same become null and void. There is no longer a guarantee. The guarantee has not been discharged, but Lehman is relieved from obligation to perform on it deeming the guarantee worthless. The trust now holds a claim against the estate, and not a debt security. The claim can be sold and transferred. That is why the CTs still trade. Technically, if you buy CT shares here you are buying a claim against the estate. As Lehman states above, distributions are received on account of your class 10b claim, not on account of the now void subordinated security.

5. But the prospectus says the guarantee is not to be discharged? The prospectus says in the terms of the prospectus that the “guarantee shall not be discharged”. That is different from the bankruptcy term ‘non-dischargable’. Certainly the bankruptcy court has jurisdiction to discharge this debt. What the prospectus is saying is that Lehman cannot not discharge their obligation to pay that debt once they make the promise/guarantee.

6. You say...but it is a guarantee? That is why it is important to see what the guarantee actually says. This is straight from the prospectus as posted here;

“Lehman Brothers Holdings is not required to pay you under the guarantee and the junior subordinated debt securities unless it first makes other required payments.

Lehman Brothers Holdings' obligations under the junior subordinated debt securities will rank junior to all of Lehman Brothers Holdings' senior debt. This means that Lehman Brothers Holdings cannot make any payments on the junior subordinated debt securities if it defaults on a payment of senior debt and does not cure the default within the applicable grace period or if the senior debt becomes immediately due because of a default and has not yet been paid in full. In addition, Lehman Brothers Holdings' obligations under the junior subordinated debt securities will be effectively subordinated to all existing and future liabilities of Lehman Brothers Holdings' subsidiaries.

Lehman Brothers Holdings' obligations under the guarantee are subordinated to all of its other liabilities. This means that Lehman Brothers Holdings cannot make any payments on the guarantee if it defaults on a payment on any of its other liabilities. In addition, in the event of the bankruptcy, liquidation or dissolution of Lehman Brothers Holdings, its assets would be available to pay obligations under the guarantee only after Lehman Brothers Holdings made all payments on its other liabilities.

Lehman Brothers Holdings is not required to pay you under the guarantee if the trust does not have cash available.

The ability of the trust to make payments on the preferred securities is solely dependent upon Lehman Brothers Holdings making the related payments on the junior subordinated debt securities when due.

If Lehman Brothers Holdings defaults on its obligations to make payments on the junior subordinated debt securities, the trust will not have sufficient funds to make payments on the preferred securities. In those circumstances, you will not be able to rely upon the guarantee for payment of these amounts. “

7. How about them NOLs? There is no NOL play. Don’t take my word. Read what Lehman says in their most current balance sheet; “>Net Operating Losses. The NOLs of the LBHI Tax Group (including Debtor-Controlled Entities) are subject to audit and adjustment by the IRS and primarily expire in or about 2028. Substantially all of the LBHI Tax Group’s current consolidated net operating loss carryovers are attributable to the Debtors. The Plan provides for an orderly liquidation of the Debtors. As previously disclosed in the Company’s Quarterly Financial Report as of March 31, 2012 [Docket No. 29731], the LBHI Tax Group received a private letter ruling from the IRS in connection with the Plan going effective that stated (i) the liquidation of the Debtors for U.S. federal income tax purposes may occur over an extended period, and (ii) the reduction of the LBHI Tax Group’s NOLs as a result of the discharge of debt pursuant to the Plan generally would not occur until completion of the liquidation. Upon completion of the liquidation of the Debtors, all remaining NOLs of the Debtors will be eliminated.” The balance sheet can be found at the EPIQ Lehman bankruptcy site link shown above. Search under dockets using key word “balance”.

8. More on NOLs. Read and study pages 134 thru 139 of the disclosure statement.
https://www.sec.gov/Archives/edgar/data/806085/000119312511239866/dex991.htm If Lehman can't pay the debt because there are no remaining funds, a cancellation of debt instrument is issued to the creditor or debtholder. The IRS basically says that if you cancel a dollar's worth of debt, the NOLs are reduced by a dollar. In the end LBHI will cancel more than $130 billion in debt. That will more than wipe out the NOLs. That is what Wayne and others are missing. They believe that the IRS will somehow allow Lehman to cancel debt, thereby allowing the creditor to use that cancelled debt as a deduction on their taxes, and still use the NOLs for reducing taxes in a newly capitalized Lehman. That is called double dipping, and that is why it will not happen. And that is why Lehman even issued a statement saying that will not happen, that all remaining NOLs will be eliminated. There are other obstacles for the NOLs being used as shown in Section 382 of the IRS tax code; https://www.law.cornell.edu/uscode/text/26/382

9. The date that some claim for November of 2019 for a final tax return has no basis that I can find. Perhaps someone can provide a link?

10. Some say the low share price and lack of volume means big holders are hanging on and not letting go. That is not market place common sense. Shares will rise along as there are buyers. There are few that want to buy these shares.

Stock message trading boards should be a resource for the discovery of profitable trading ideas, discussion, and debate. Not personal attacks. If I disagree with you it is not because I don't like you. It is just my opinion. But, in the case of these CTs, if you can read the disclosure statement, the modified plan of liquidation, and the balance sheet it is 100% certain that the CTs will see zero recovery. I know, we all would like to see a return to the financial crisis to pick up shares for pennies and sell for multi-dollars but that time is over for Lehman CTs. Do your own DD. I am just trying to help with the process and balance the discussion.

Good trading, Joe

Joe Stocks