how CHAPTER 11 WORKS:
Right now LEH is, in bankruptcy jargon, a "debtor in possession". A debtor in possession is a new legal entity -- it is no longer a "corporation" as we normally think of it. LEH is the bankrupt "debtor" (it owes tons of money to lots of creditors), but it is currently "in possession" of its assets (meaning, it is still operating). At this point, bankruptcy cannot be "withdrawn". However, LEH could "emerge" or "exit" from Ch. 11 as a reorganized entity, with assets and liabilites, and at a price, to be determined. But more on that later.
Typically, a debtor in possession obtains court approval, with the blessing of the secured creditors, to continue to use its cash to pay operating expenses during the Ch. 11 proceeding. Typically, a court and the creditors will be ok with that, because doing so preserves value in the enterprise, while the creditors, the bankruptcy trustee and the bankruptcy court figure out what to do with the company and/or the company's assets. (If the debtor is not allowed to pay its bills and its employees, then there would be nothing left to "restructure".)
At this point any deal, whether the company is sold piecemeal or whole, will require court approval. Morevover, any material asset sales, and/or any "plan" to reorganize LEH, will require the vote of the secured and (potentially) the unsecured creditors, each voting as a separate class of creditors. It is unlikely that the preferred shareholders or the common shareholders will, as a class, have any approval rights over asset sales or a "plan", but that depends on what the proposed plan entails, and whether there is value left in LEH that trickles down to those classes.
If there are asset sales (which will require court approval, and the consent of the secured creditors), then the proceeds (i.e., cash) from those sales will go to pay down secured debt first. Secured debt always has the first priority, with limited exceptions. Next, unsecured debt will get paid with the proceeds (if there's anything left). And, assuming there's still cash left, then the preferred stock, and finally the common stock, would get paid, in that order. Common stock is ALWAYS last in line.
In an asset sale scenario, it is very unlikely that the common will get anything, because if the common were worth anything, the company would probably not have declared bankruptcy.
However, there could be a "plan" of reorganization, that includes the purchase of the company by a third party -- in this case, potentially Barclays. Such plans are often quite complicated, but since the filing is so fresh (and there are so many emplyee shareholders in LEH), it is possible that some value gets preserved for the shareholders. In its simplest form, the bad assets and some good assets might be sold (reducing secured debt), and the remaining unsecured debt and common/preferred share structure passed through bankruptcy to the "reorganized" LEH (which would be, technically, another "new" entity upon exiting from Ch. 11). The remaining creditors of the "reorganized LEH" would then receive replacement debt and replacement stock. How much, and with what rights, would need to be determined.
I caution everyone that this is highly speculative, and any value here for the common is not likely to be anything near what it was before LEH filed for bankruptcy. But I can tell you from experience that purchases of companies out of bankruptcy happen all the time, and Ch. 11 is often used as a tool by creditors or potential purchasers to wash out bad obligations and obtain "clean" assets. Unfortunately, often at lower valuations
from an attorney on another board!
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