…and Dicktor Fuldenstein’s monster will walk the earth once more. Or will it? We simply couldn’t resist giving you more details of the restructuring plan for Lehman Brothers — filed in New York late on Monday, and reported by the FT on Tuesday.
Now, there is an optimistic case for the restructure, as aired in BusinessWeek’s story:
In a court filing yesterday, Alvarez & Marsal LLC said it wants to place 70 of its members handling the bankruptcy and the remaining 385 Lehman employees in a new business called Lamco Holdings LLC and to solicit assets to manage for a fee from third parties. Alvarez & Marsal also said it is seeking investors willing to acquire a stake in Lamco…
…“In the course of managing and administering such assets, LBHI has built a going-concern asset management business that may be of substantial value, with capabilities that may endure beyond the administration of these chapter 11 cases, and generate revenues,” the firm said.
But there are also plenty of downsides to the Lamco plan.
Note that Lehman’s legatees have set out on the route of substantive consolidation first, treating its creditors’ claims on its many and varied units in one place.
While it’s clearly a way to restrain the number of claims as far as possible, it is also meant to be easier in terms of actually sorting out who owed what. However, the NY Post gives us leave to doubt whether even this process will be possible:
Lehman’s liquidation plan came on deadline day, and with an extension request. As expected, the company asked the US Bankruptcy Court in Manhattan if it could have until April 14 to file documents that disclose its current state of affairs.
That it has taken 18 months to get to this point is testing the patience of some creditors. “This is less complicated than Enron and it’s taken longer to get to this stage,” one said.
Oh yes, the creditors. We foresee a veritable Gothic horror novel of negotiations ahead.
After all: at least $830bn claims have been filed, versus around $115bn of estimated real debt in Lehman’s units. To say nothing of an unquantified amount of debt sloshing around the parent company itself, according to another BusinessWeek piece. Which also includes perhaps our favourite detail from the reorganisation proposal:
While it’s mostly liquidating assets to pay creditors, Lehman is holding on to some units and properties including real estate, uranium stockpiles and private equity. Those units will continue to operate until sale prices of their assets recover, under Lehman’s plan.
Ah, yes — this would be the 450,000lb of yellowcake that the bank acquired in a commodities trade shortly before its collapse and hasn’t been able to get rid of since, as the Guardian reported last year.
There you have it. Lehman: possibly reborn, but still as radioactive as ever.
Related links:
The Lehman potboiler – FT Alphaville
Repo 105 -FT Alphaville
The genesis of Repo 105 – FT Alphaville
Cap * 105 – FT Alphaville