Lehman gets court OK to boost recruiting, retention program; schedule-filing deadline extended 60 days

By Rebecca Melvin

New York, Nov. 20 - Lehman Brothers Holdings Inc. received court approval of two important requests Thursday, including authority to implement its retention and recruitment program, which will increase salary expenditures to about $96 million for the wind-down period, and to extend its deadline to file schedules and financial statements for another 60 days until mid January.

The extension to file schedules and other financial affairs was approved despite an objection from Harbinger Funds, which was overruled by judge James Peck of the U.S. Bankruptcy Court for the Southern District of New York.

Harbinger said it was concerned about "board disclosure."

Because of the size and complexity of the case, Lehman said it needs to increase its current work force to about 620 people by year end, up from about 260 currently.

The new employees will work mostly on derivative transactions, and due to the highly specialized aspect of derivatives work and the scarcity of qualified individuals, the compensation requirements are high, Lehman counsel, Harvey Miller of Weil, Gotshal & Manges, told the court.

The program also includes a bonus plan in which employees will be eligible to earn bonuses that in aggregate are not to exceed $110 million.

Currently, Lehman's employees earn an aggregate base salary of about $15.5 million.

Miller also said that Lehman will hire a former Lehman chief financial officer, David Goldfarb, to assist with the wind-down work. His six-month salary will be $500,000, and he will have the opportunity to earn a bonus of up to another $500,000.

Employees will be divided into asset divestiture and operational teams.

The asset divestiture team would be broken up into smaller teams that oversee the administration and wind-down of the Lehman's loan book, derivatives book, private equity/proprietary portfolios, international operations, domestic banks, real estate portfolios, and other assets.

The operational team will be divided into smaller teams that oversee audits and claims, treasury, accounting and finance, and wind-down.

The recruiting and retention program was uncontested and had the support of the creditors committee, which Peck said was a notable achievement.

In his status report to the court, Miller said that level of stabilization in the case has improved since last month, and that the consummation of various sales had increased the estate's financial position and liquidity by $2.2 billion.

Miller said that bankrupt Lehman had $4.8 billion in cash, which after various refunds, including $400 million to Lehman Brothers Europe, now stands at $3.5 billion.

With collection and preservation of data being Lehman's No. 1 priority, Miller said he was pleased to report that half of the necessary data was captured to date, and the estate is "in complete control of the cash disbursement system."

International proceedings underway now tally 76, covering 15 countries, Miller said.

Finally, efforts to promote as much transparency as possible in the case has led to the establishment of nearly a dozen websites, he said.

New York-based Lehman Brothers Holdings was the fourth-largest investment bank in the United States. The company filed for bankruptcy on Sept. 15. Its Chapter 11 case number is 08-13555.

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