Replies to post #81650 on Lehman Brothers Financial SA (LEHNQ)

[stockmojo9]

The legalese I was looking for is the following from the LEHNQ prospectus pg. 13, under "Certain Terms of Subordinated Debentures - Option to Defer Interest Payments":

"During any deferral period, neither Holdings or any of its subsidiaries will be permitted to:

• pay a dividend or make any other payment or distribution on Holdings' capital stock;

• redeem, purchase or make a liquidation payment on any of Holdings' capital stock;

• make an interest, principal or premium payment, or repay, repurchase or redeem, any of Holdings'(S-13) debt securities that rank equal with or junior to the subordinated debentures; or

• make any guarantee payment with respect to any guarantee by Holdings of debt securities of any of its subsidiaries, if the guarantee ranks equal to or junior to the subordinated debentures."

The junior, subordinated debentures assets of the CTs are an LBHI claim, likely a Subordinated Class 10A claim, Class 4B Senior Affiliate Guarantee or Class 5 Senior 3rd Party Guarantee Claim. One of either of them.

No distributions have been made to Class 10A but they don't identify guarantee claims.

Class 4B has received 35% & Class 5 has received 28% approximately but it isn't clear if the distributions are to any subordinated claims.

Does anyone know for a fact the Class of the subordinated debentures with guarantees claims class?

In terms of the UK subsidiary ECAPS or payments to non-debtor LBT note holders, it seems the LEHNQ prospectus restricts these payments ". . . if the guarantee ran equal to or junior to the subordinated debentures".

And, if they are non-guarantee claims, how can they be anything but junior to the subordinated debentures with guarantee?

Are we now looking at a special event? An "Investment Company"?

If the subordinated debentures are either Class 4B or 5, haven't they been paid distributions in some restricted funds account already?

[stockmojo9]

Thanks, Jersey.

This seems now like a more complicated program than what I understood before so I'll be continuing to read through this information.

It looks like cotton posted a very real concern about the guaranty of subordinate debentures as they relate to a more general, universal guaranty of Senior issues and issues in subsidiaries.

This is why my DD included repayment in bankruptcy precedents which are documented in the case of CTs.

So, IMO, for the LBHI not to pay the CTs would be similar to a health insurer who states they would pay for cancer treatment or a pre-existing condition and then declining to do so after the fact.

FWIW

[stockmojo9]

"Lehman Brothers provided investment opportunities to its clients via the issuance of LBT Issued Notes. The EMTN Program and Non-EMTN Programs were investment programs arranged by Lehman Brothers International (Europe) (“LBIE”) under which LBT, among other entities, issued structured notes to individuals and financial institutions. These notes predominately provide that the return at maturity and/or the payment of periodic interest is linked to the performance of an underlying asset or groups of assets including global indices, single stocks, currencies, interest rates, and various credit derivative instruments and baskets thereof (“Underlying” or “Underlyings”). In some instances principal and/or interest due under such notes may be partially or wholly “protected”. Some structured notes were relatively simple notes that paid interest at fixed or floating rates; others were highly complex and uniquely tailored to the interests of specific investors. LBIE, with the assistance of Lehman Brothers Limited (“LBL”), acted as the arranger, dealer, and calculation agent with respect to the EMTN Program and Non-EMTN Programs."

LBT could be issuing secured Notes in which case there is an underlying asset.

The question becomes where are the assets? On what balance sheet? And, what is the market value of the asset?