Lehman Brothers Financial SA (LEHNQ)

[jwnoble3]

Full disclosure, I read this on http://www.kattenlaw.com/lehman-brothers-debtors/ and I'm thinking what does this mean for the Assets under management in LAMCO (~47B)? See below in quotes:

"One of the more controversial features of the joint plan is the treatment of guarantee claims against LBHI. The plan essentially caps the amount of allowed guarantee claims by LBHI with respect to each primary obligor. The overall cap for all LBHI guarantee classes is approximately $94.1B. Based on reported statements from Bryan Marsal, this figure seems to be tied into LBHI’s view of its overall worldwide guarantee liability, although how the figure was derived is unclear. To illustrate how the cap mechanism would work, LBHI guarantee claims of Lehman Brothers Special Finance Inc. (LBSF) obligations are placed in their own class and are capped at approximately $15.8B. If it turned out, for example, that aggregate allowed guarantee claims against LBSF were $31.6B (twice the cap), every allowed LBHI guarantee claim of an LBSF obligation would only be allowed at 50% of its allowed face amount against LBSF for purposes of sharing in LBHI’s Available Cash. Thus, a creditor with an allowed claim against LBSF of $20 million would only have an allowed guarantee claim against LBHI of $10 million. In the unlikely event that the joint plan overestimates the aggregate allowed guarantee claims (i.e., all allowed LBHI guarantee claims are less than the $94.1B total cap), the surplus would be shared among classes of LBHI guarantee claims where there was a shortfall, pro rata, based on the ratio of a class’s particular shortfall to the aggregate amount of all guarantee class shortfalls.

In recognition that it could take years to resolve all of the LBHI guarantee claims, the advantage to this approach is that it allows LBHI to more easily reserve a maximum amount of Available Cash attributable to guarantee claims and begin to make payments in respect of other allowed, undisputed claims against LBHI (e.g., bond claims) without first resolving all or most of the guarantee claims. The disadvantage is that for creditors in guarantee classes where the cap is below the allowed amount of allowed guarantee claims in the class, those claims will get a smaller distribution than other unsecured claims against LBHI without any meaningful legal basis for the discriminatory treatment.

Also potentially controversial is a cap on LBHI guarantee claims of affiliates that are capped at approximately $21.2B. The plan proposes to negotiate with affiliates and make an allocation proposal within six months of the plan’s effective date. If the affiliates vote to accept the allocation by plan-voting majorities (2/3 in amount and majority in number), all affiliates will be bound to the allocation. If not, the bankruptcy court will be asked to allocate the $21.2B. Like the treatment of guarantee claims of non-affiliates, this treatment results in a lesser payment to affiliates holding guarantee claims if the total allowed affiliate guarantees exceed $21.2B."