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This, The Following Is Dated May 2019' ...
"Lehman Brothers Holdings Capital Trust Preferred Stocks: Still Trading 10 Years Later"
May 20, 2019 11:17 AM ET Lehman Cp Iii LEHKQ, LEHLQ, LEHNQ, LHHMQ
* Four Lehman Bros. Holdings Capital Trust preferred stocks continue to be traded in the OTC market.
* Capital trust preferred stocks are designed to be hybrid securities that possess characteristics of both debt and equity.
* It is my understanding that a bankruptcy court hearing on May 30, 2019, may clarify the value of the LEHKQ, LEHLQ, LHHMQ, and LEHNQ preferred stocks, if any.
* It appears that the argument is that the CT preferreds should be in parity or higher relative to certain claims that were paid in 2014.
* Investors should do their own due diligence. It is not possible to predict the outcomes of ongoing and potential litigation with respect to these capital trust preferred stocks.
* Four Lehman Brothers Holdings Inc. (LBHI) capital trust (CT) preferred stocks continue to trade in the over-the-counter market. These are the 6.00% Series M (OTC:LHHMQ), the 6.375% Series K (OTC:LEHKQ), the 6.375% Series L (OTC:LEHLQ), and the 6.24% Series N (OTC:LEHNQ).
* Each of these CT preferred stocks has a liquidation amount of $25. There are 48 million shares of these CTs, with a "liquidation amount" of $1.2 billion.
Dividends have been suspended since 2008 (the prospectuses of these CT preferreds allow the preferred dividends to be suspended for only 20 quarters). In recent weeks, these CT preferred stocks have traded in the 10 to 20 cent range, which is less than one cent on the dollar in terms of market price to liquidation value. I have previously written about the LBHI CT preferreds here.
Rex Wu (Pro Se) has filed this motion before U.S. Bankruptcy Court Judge Shelley C. Chapman. This motion explains that the four LBHI CT preferreds:
Now trade on the OTC Pinksheets exchange.
Currently have an unsecured subordinated debt claim in Class 10B with their distributions reallocated to higher classes and are stated as unlikely to receive any distributions.
Are entitled to file a claim to enforce the "guarantee" as stated in the prospectuses of the four LBHI CT preferreds.
Are "on a parity" with certain other LBHI senior preferreds or preference stock, as described in Rex Wu's motion.
LBHI and JPMCB/JPMSI are co-debtors and thus affiliates in this bankruptcy via common control.
It is my understanding that Rex Wu seeks payment from LBHI for any payments made to parity senior preferred or preference stock and with respect to any guarantee.
To be clear, I am simply summarizing Rex Wu's motion for an order enforcing the Modified Third Amendment Joint Ch. 11 plan of LBHI and its affiliated debtors and the related Confirmation Order.
I have not done an independent and thorough evaluation of the merits of Rex Wu's arguments. I would encourage interested readers to read the document linked above carefully.
The Bankruptcy Court's decision on this matter may resolve the status and value of the four CT preferred stocks in a way that may be favorable to investors in LBHI CT preferred stocks. Alternatively, it is possible that the Bankruptcy Court's decision could be appealed in some fashion.
This article was written by
Wayne Olson, CFA
CFA, CPA, MA in Economics.
Disclosure: I am/we are long LEHLQ, LEHKQ, LEHNQ, AND LHHMW. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
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It Is And Has Been My Opinion That The Court Will Make The Correction'
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