Lehman Brothers Financial SA (LEHNQ)

[linda1]

From what I have read SUBORDINATION is a non-issue in Substantive Consolidation. All assets and liabilities of the Debtors are pooled together and the rights of the Creditors are waived.



"In short, substantive consolidation is the merging of assets and liabilities of a debtor into one big pool where creditors look for recovery. In principle, by consolidating units (i.e. disparate corporate entities, divisions, malls, etc) a debtor is essentially simplifying the process of how it will settle with all its creditors. In a substantive consolidation, certain parties are helped and certain parties are hurt. If a better capitalized subsidiary with better assets is consolidated with a worse capitalized subsidiary with more debt, the lenders to the former subsidiary get hurt - the assets they were going to get to get their loans paid off now are in a bigger, more toxic pool."