Wednesday, March 24, 2010
Lehman Seeks Strategic Partner For New Asset-Management Unit
Eric Morath @ DowJones
Lehman Brothers Holdings Inc. is shopping for an investment partner to take a minority stake in a newly created asset-management business that could emerge from the failed investment bank's Chapter 11 case.
Lehman Chief Executive Bryan P. Marsal said Tuesday that the bank has already identified a few potential strategic partners interested in buying an equity stake in the business it refers to as LAMCO, short for Legacy Asset Management Co.
"We're talking to possible joint-venture partners that are willing to accept a minority interest in LAMCO," Marsal said in an interview. "We're looking for a partner to help LAMCO access pools of illiquid assets to place on the existing platform" that's winding down Lehman's investments.
Lehman's creditors would own a majority of the subsidiary that would operate outside of bankruptcy, if Lehman obtains court approval for the move.
Lehman is set to seek approval to sell a stake in LAMCO during an April 14 hearing in the U.S. Bankruptcy Court in Manhattan, the same day it would seek court permission to create the subsidiary.
Marsal said talks with potential partners will get more serious after Lehman has obtained court permission to create the unit.
Marsal said the creation of LAMCO would formalize a business that already employs about 450 Lehman workers to wind down the investment bank's assets, which have a book value of $57 billion. The market value of those assets, which include real estate holdings, corporate debt and derivatives, is closer to between $25 billion and $30 billion, he said.
Lehman is looking for a partner with "creditability in the financial marketplace" that could help fund LAMCO's operations and make connections with other holders of illiquid assets, such as large financial institutions, regional banks and hedge funds, Marsal said.
The vision for LAMCO is to have the entity continue to wind down Lehman's assets for a fee while adding additional assets to manage from third parties. The strategy will keep several hundred workers employed even after Lehman's assets are liquidated, Marsal said.
LAMCO will also "create value" for Lehman's creditors by applying the technology and skills developed to wind down Lehman's assets to other entities, Marsal said. He said LAMCO would already be the largest manager of illiquid assets in the U.S.
"Is it efficient for every bank to have its own real-estate workout group when we've already developed a very efficient model to deal with those assets?" Marsal asked.
LAMCO would only manage illiquid assets, it would not purchase them, Marsal said. However, a potential strategic partner could buy assets to be managed, he said.
"We are a gun for hire," Marsal said. "We don't have the wherewithal to be an investor."
To start LAMCO, Lehman's bankruptcy estate would invest $20 million in cash and contribute certain intellectual property and technology needed to manage the entity.
Marsal didn't identify potential partners for LAMCO, but he said the turnaround firm he co-founded, Alvarez & Marsal, is not a possibility.
"As an officer of the estate, we are prohibited by law from owing a piece of LAMCO," he said. Alvarez & Marsal would continue to be "part of the management" of LAMCO.
Lehman's bankruptcy estate has employed the firm to manage the company since its Chapter 11 filing.
Lehman has tapped investment bankers Lazard Freres & Co. and Houlihan Lokey Howard & Zukin Capital Inc. to market LAMCO.
And,"Barry Silbert started SecondMarket in 2004 after advising distressed companies for investment bank Houlihan Lokey."
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