Lehman Commercial Paper 'first-day' bankruptcy motions approved

By Caroline Salls

Pittsburgh, Oct. 7 - Lehman Commercial Paper Inc. received court approval of its "first-day" bankruptcy motions, including a request to continue to fulfill its obligations as administrative agent, according to an LSTA news release.

Specifically, the company was granted court approval to continue to use an agency account, with a provision that funds in the company's agency account at Citibank are not property of Lehman Commercial Paper's estate except to the extent of its proportional share of the funds as lender.

The company also secured court approval to transfer, assign or resign from any administrative agency positions it determines in accordance with its business judgment. LSTA said the order makes it clear that the company is empowered to do this but not obligated to do so.

Any transfers, assignments or resignations must be done in accordance with the provisions of the applicable credit agreements and requires Lehman Commercial Paper to enter into customary successor agency agreements.

Lehman Commercial Paper also received court approval to elevate participations and sub-participations in consultation with its official committee of unsecured creditors, with the order clarifying that this right applies equally to loan participations and participations in trade claims and that any elevations are subject to the provisions of the applicable credit agreements.

According to the release, all cash, securities and other property distributed or payable on the company's participations or sub-participations are not property of Lehman Commercial Paper's estate and will be promptly turned over to the beneficial holders.

The LSTA said the company, the creditors committee or any party in interest has the right to argue that participations or sub-participations were not true sales and that property distributed to these holders of participations or sub-participations was property of the estate.

As previously reported, the company said it is party to more than 500 participations or sub-participations where it acts solely as an intermediary, and the true parties in interest would like to eliminate Lehman Commercial Paper as the go-between.

Lehman Commercial Paper said it has billions of dollars in unfunded loan commitments, representing potential liabilities of its estate. The company said that elevation would relieve it from these potential liabilities.

Also in its first-day motions, the company said it currently serves as administrative agent of several hundred loans.

In order to remain serving as administrative agent, Lehman said it must be able to provide both borrowers and syndicate members with concrete assurance that it will have unfettered access to funds in the bank account used in connection with the administration of the agency business.

Lehman Commercial Paper filed for Chapter 11 bankruptcy on Oct. 5 in the U.S. Bankruptcy Court for the Southern District of New York. Its Chapter 11 case number is 08-13900.

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