A U.S. bankruptcy judge approved on Wednesday a request by Lehman Brothers Holdings Inc (LEHMQ.PK) to create a protocol for interacting with many of its foreign entities, in a move that could help the bank complete its wind down.
Lehman, which filed for bankruptcy protection last September, has designed the protocol as a set of basic principles on how to cooperate, share information and preserve the company's asset values across various international units that were once all part of the same investment bank.
Richard Krasnow, a Weil Gotshal & Manges attorney representing Lehman, said at a hearing in U.S. bankruptcy court in Manhattan on Wednesday the protocol is not binding and that any conclusions reached under the protocol may need to be approved by the court at a later date.
"There is a path to be followed and a desire and mindset on the part of the administrators and the debtors to try to cut our way through the morass and indeed arrive at common solutions here," Krasnow told the court.
He said the group signing on to the protocol would meet in in London on July 15 to begin working together.
Lehman has about 75 different insolvency proceedings progressing at the same time globally, although only a portion of those administrators have signed on to the protocol. The group signing on to the protocol includes Lehman's U.S. units, Hong Kong, Singapore, Australia, the Netherlands and Luxembourg.
Groups that are not yet signed on to the protocol and including entities in Japan, Switzerland and Bermuda, may attend the meeting in mid-July, even though they are not formally signed on to the protocol, Krasnow said.
The administrators of Lehman Brothers International (Europe) (LBIE) in the United Kingdom, one of Lehman's largest international units, have not yet signed on to the protocol and have indicated they do not intend participating in the process, Krasnow told the court on Wednesday. He said the group is invited to participate in the London meeting in July if they choose to do so.
In approving the protocol U.S. bankruptcy Judge James Peck, said he would like to see the UK administrators take part in the meeting.
"I hope the meeting in July turns out to be a productive one and that the representatives of LBIE find some time to intersect with the many other parties of interest who will be there at the same time," Peck said, after asking Krasnow whether he should draw any comfort from the fact the meeting is taking place in London.
Judge Peck has said the resolution of Lehman's international coordination issues would be crucial to coming up with a process to complete Lehman's bankruptcy and even wrote a letter urging LBIE's administrators to join the process in April.
In court papers, lawyers for the LBIE administrators have said they found some aspects of the protocol "surprising" and that the administrators were bound by U.K. law to act in a way that preserves the value of the LBIE assets.
The protocol is one of several times the European and the U.S. Lehman entities have been at odds. Early in the case, LBIE claimed that $8 billion was transferred out of its unit to the U.S. unit on the eve of Lehman's bankruptcy filing. Lehman later disputed that claim in court, saying that the firm's accounts went into lockdown on the day of the bankruptcy filing and scheduled transactions could not take place.
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