Replies to post #116171 on Lehman Brothers Financial SA (LEHNQ)

[cottonisking]

What is the purpose for LBHI using escrow markers for its trust preferred securities and stock on March 6, 2012?



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On March 6, 2012, Lehman Brothers Holdings Inc. (LBHI) used escrow markers (specifically through the LBHI Plan Trust) for its cancelled stock and certain securities to manage the transition of equity interests into a liquidating trust following the confirmation of its Chapter 11 bankruptcy plan.
SEC.gov
SEC.gov
+1
The primary purposes for these escrow markers were:
Cancellation and Tracking: To facilitate the formal cancellation of old stock and trust preferred securities while enabling the tracking of former holders' "non-transferable beneficial interests" in the new Plan Trust.
Economic Entitlement Record: To record the economic entitlements of former shareholders, even though it was not expected that they would receive any distributions, as all creditors had to be satisfied first.
Tax Reporting (Grantor Trust): The Plan Trust is treated as a "liquidating trust" (taxed as a grantor trust) for U.S. federal income tax purposes. The escrow markers allow holders to be treated as direct owners of the underlying assets for tax purposes.
Capital Loss Recognition: While the stock interests were non-transferable, the bond escrow positions (often using "Escrow CUSIP" markers) allowed bondholders to recognize a capital loss by selling their position in the Plan Trust.
Epiq 11
Epiq 11
+4
This restructuring allowed the company to move forward with distributing assets to creditors while preserving a mechanism for shareholders to receive value only in the highly unlikely event that a distribution for shareholders became possible.
Epiq 11
Epiq 11