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Goldman, Morgan Stanley Fault Lehman’s Business Plan (Update1)
April 06, 2010, 11:48 AM EDT

By Linda Sandler

April 6 (Bloomberg) -- Goldman Sachs Group Inc., Morgan Stanley, Credit Suisse Group AG and other banks objected to Lehman Brothers Holdings Inc.’s plan to build an asset- management business, saying the bankrupt investment bank should focus on paying creditors.

The new business would be “a reorganization plan for debtors’ employees and management separate, apart and ahead of the reorganization plan for creditors,” the banks said yesterday in a court filing.

A unit called Lamco, staffed by current employees and managers, would run the defunct investment bank’s real estate and private-equity assets, also taking outside business, Lehman said in March. Chief Executive Officer Bryan Marsal has said the assets might eventually fetch about $30 billion, out of a possible $50 billion in recoveries for creditors.
The Lehman parent would have sole control and ownership of Lamco, denying “any governance or ownership interest” to affiliates that helped to fund Lamco, or to creditors, Goldman and the other banks said. They described the proposed Lamco deal as an “insider transaction,” not an “arms-length sale.”

Further Education

Most of the issues in the objections should be resolved with “further explanation or education,” Marsal said in an interview today.

“The issue of ownership is the one legitimate or philosophical issue that may take longer,” he said. Right now, creditors of the Lehman holdings company want 100 percent ownership of Lamco, he said.

The objection was filed by seven banks and two investment companies that are derivatives creditors of a Lehman affiliate, including Merrill Lynch & Co., its parent Bank of America Corp. and Deutsche Bank AG. By putting Lehman managers and employees ahead of creditors, Lamco would turn the Chapter 11 reorganization “on its head,” they said.

Lamco would fulfill an immediate need to manage Lehman assets that would fetch much more money if sold over three to five years than if they were liquidated today, Marsal said. It would use people and infrastructure that already are available, and wouldn’t change compensation for the Alvarez & Marsal restructuring firm or Lehman employees, which already are in place, he said.

Lehman’s U.K. units objected to the plan in a separate filing, saying Lehman hadn’t provided enough information to assess its merits.

A hearing on the Lamco proposal is scheduled for April 14 in U.S. Bankruptcy Court in Manhattan. Lehman that day is due to file a detailed explanation of its liquidation plan, outlined on March 15 together with the Lamco proposal.

The case is In re Lehman Brothers Holdings Inc., 08-13555, U.S. Bankruptcy Court, Southern District of New York (Manhattan).




http://www.businessweek.com/news/2010-04-06/goldman-morgan-stanley-fault-lehman-s-asset-management-plan.html