Lehman Brothers Financial SA (LEHNQ)

[cottonisking]

♾️Here Nova:

Following the bankruptcy of Lehman Brothers in 2008, the investment bank's venture capital arm was spun off and bought by a group led by its own management team and secondary firm HarbourVest Partners. The new, independent firm was renamed Tenaya Capital. As part of the deal, HarbourVest assumed Lehman's venture capital interests, and the Lehman estate kept a performance-based profit share.
HarbourVest's secondary transaction
Purchased existing limited partner (LP) interests: HarbourVest bought out a portion of Lehman's LP stakes in the funds.
Used a "synthetic secondary" deal: This means the transaction was not a typical transfer of stakes but also involved the purchase of investments that were held on Lehman's balance sheets.
Acquired existing and unfunded commitments: As a secondary investor, HarbourVest took over Lehman's existing investments and outstanding commitments to the venture funds.
Tenaya Capital management spin-out
Formed new entity: The venture arm's management team spun out and formed the new firm, Tenaya Capital.
Bought general partner (GP) stake: The partners at Tenaya Capital bought Lehman Brothers' minority general partner stake.
Secured $750 million under management: This included capital from the purchased interests and existing commitments.
Lehman estate and creditor repayment
Retained performance-based profit share: By keeping a profit share, the Lehman estate's interests were aligned with the success of the new firm.
Facilitated creditor repayment: The sale of various assets, including this venture capital business, was a necessary step to help repay Lehman's creditors, a process that was expected to take several years.
Avoided selling in a down market: Retaining stakes in profitable businesses allowed the Lehman estate to continue receiving cash flow rather than selling everything in a troubled market.

AI Overview



+11
The spin-off of Lehman Brothers Venture Partners (LBVP) as an independent firm, which was renamed Tenaya Capital, involved a multi-faceted agreement with secondary investor HarbourVest Partners. This structure was designed to provide continuity for the venture fund's operations while allowing the Lehman estate to monetize its holdings and repay creditors.
Here are the details of the agreement:
The Spin-Off Structure
New Entity: The venture capital arm's existing five-partner management team, led by Thomas Banahan, spun out to form Tenaya Capital.
Assets Under Management: Tenaya Capital assumed management of the existing portfolio, which at the time consisted of approximately 45-47 companies and around $750 million in total capital under management (which included existing investments and remaining commitments to the active fund).
Management Buyout: The management team essentially bought Lehman Brothers' minority general partner (GP) stake in the venture funds.
HarbourVest Partners' Role
HarbourVest Partners, a firm specializing in secondary private equity transactions, played a critical role in facilitating the spin-off and providing liquidity.
Assumption of Commitments: HarbourVest assumed Lehman's existing limited partner (LP) investment and unfunded commitments to the primary fund being managed (Lehman Brothers Venture Partners V LP, a $365 million fund raised in 2007). This provided immediate capital and certainty to the fund's operations and existing Limited Partners.
Synthetic Secondary Transaction: The deal involved a "synthetic secondary" structure, meaning it included a purchase of existing LP interests from Lehman and the purchase of other venture capital company investments held directly on Lehman's balance sheet.
Financial Details: While specific overall financial terms were not publicly disclosed, HarbourVest bought the Lehman LP stake (including a reported $75 million of the $365 million Fund V). This infusion of capital from the sale of the LP stake went to the Lehman estate to help pay creditors.
Lehman Estate's Retained Interest
Crucially, the Lehman estate did not fully divest itself of the potential upside, aligning incentives for the new firm's success.
Performance-Based Profit Share: The Lehman estate retained a performance-based profit share, often referred to as a "carried interest" in private equity terms. This meant that if Tenaya Capital's portfolio reached certain performance hurdles (e.g., returned a certain amount of capital to investors), the Lehman estate would receive a percentage of the profits.
Goal Alignment: This mechanism ensured that the new firm's management was incentivized to maximize the value of the portfolio over time, as better performance would generate more funds for the Lehman estate to distribute to its own creditors.
In essence, HarbourVest provided a necessary cash injection and operational stability, while the performance-based clause gave the Lehman estate a long-term interest in the success of the new Tenaya Capital.

Investment Stage: These were typically investments in the mid-to-late stage venture capital rounds of the companies.
As part of the spin-off, secondary investor HarbourVest Partners assumed Lehman's existing investment and unfunded commitments to the venture funds, while the Lehman estate retained a performance-based profit share, aligning the new firm's incentives with the estate's goal of repaying creditors.