Wamutrader - This is an article from WSJ in 5/14/2009 about Lamco Legacy Asset Management Co that has more detail. I bolded a section that stands out as important to me.
By JEFFREY MCCRACKEN and ALEX FRANGOS
Eight months after its plunge into bankruptcy, Lehman Brothers Holdings Inc. is taking steps to spin off the Wall Street firm's remaining assets -- a collection of battered real-estate and private-equity holdings -- to investors willing to bet the value will rise as the economy recovers.
The unit oversees everything from corporate-bank debt and risky consumer mortgages to Miami condos and New York apartment complexes. Internal Lehman calculations have pegged their fair-market value at about $45 billion. That is down by more than half since last September, when the financial crisis flared after Lehman's collapse. Lehman values the assets at $400 billion at nondistressed prices, including $300 billion in the servicing of assets
People inside Lehman have begun calling this division Lamco, short for Legacy Asset Management Co. Lehman hasn't determined if it can or will use the name in a spinoff.
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A spinoff would be the most significant move yet to clean up the bankruptcy estate of the once-storied investment bank, which owes creditors some $200 billion.
The commercial real-estate market remains deeply fraught. Most analysts expect it to worsen this year as rents fall and landlords default on mortgages. Many of Lehman's loans were made to condo and hotel developments, two of the hardest-hit sectors.
But executives now running the remnants of Lehman say they want to be prepared for a rebound in asset values. Their plan is first to legally separate the asset-holding company from the bankruptcy estate by the beginning of 2010. Later it would begin selling company shares to the public.
"This would be a bridge to a better time. Today's market is an aberration. We don't think it will stay like this," said Bryan Marsal, Lehman's chief restructuring officer and co-CEO of the advisory firm Alvarez & Marsal.
Company executives don't expect the new venture simply to manage Lehman's legacy property holdings. The entity could become much more active than current bankruptcy law permits, free to dabble in distressed commercial real-estate debt.
Another possibility: Participate in federal efforts such as the Public-Private Partnership Investment Program, to purchase and manage toxic loans from bank balance sheets.
"It will take some time, but we hope this would turn into a real business that could also manage the assets of other businesses, such as what's being proposed by Treasury," Mr. Marsal said.
The plan is in preliminary stages and would need approval by Lehman's creditors, board and a U.S. bankruptcy judge. Creditors, perhaps via a trust, would own the spun-off company and its profits would go to paying claims. Creditors would decide later when to sell shares on the open market. Employees also would get a partial stake.
Lehman's finance chief, William Fox, estimates Lamco has generated about $8 billion in positive cash flow since Lehman's bankruptcy filing, accounting for the majority of the company's $11 billion cash balance. When it filed for bankruptcy protection, Lehman had about $200 million in cash on hand.
"Given our liquidity, we don't need to be selling things at a significant discount to fair-market value," said Mr. Marsal, whose firm was hired to manage Lehman late on Sept. 14.
Lamco has three divisions: real estate, banking and private equity. It employs about 2,300 people, overseeing assets that are valued at $40 billion to $45 billion.
.The biggest division is real estate, which has both commercial and residential holdings around the world. Mr. Marsal estimated the division manages about $20 billion or more in assets.
The banking group holds about $13 billion in corporate debt. The private-equity piece includes both Lehman's private-equity funds and others in which it has limited-partnership interests; this unit oversees about $12 billion in assets.
There also is a separate derivatives book, valued at $36 billion in September 2008, which has been wound down drastically.
A new company containing so many disparate parts might be a hard sell.
"I'm not sure if the market would react positively to a mishmash of holdings within commercial real estate," said William Marks, a real-estate stock analyst at JMP Securities in San Francisco.
The Lehman spinoff would create one of the largest real-estate operators, managing $20 billion in equity and loan positions, tied to everything from office skyscrapers to raw land.
Lehman's biggest real-estate asset is apartment giant Archstone, which Lehman took private for $22 billion in October 2007. Lehman spent more than $4 billion on the venture, a deal widely seen as burdening Lehman's corporate balance sheet in its dying days.
Today, Lehman, with the court's approval, has put $230 million more into Archstone, hoping its big city luxury apartments regain their value on the other end of the recession.
Write to Jeffrey McCracken at jeff.mccracken@wsj.com and Alex Frangos at alex.frangos@wsj.com
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