Lehman requests court OK to make more capital contributions to bank

By Caroline Salls

Pittsburgh, March 23 - Lehman Brothers Holdings, Inc. requested court approval to make an investment to support the capital level of Lehman Brothers Bank, according to a Monday filing with the U.S. Bankruptcy Court for the Southern District of New York.

According to the motion, the Office of Thrift Supervision issued a Prompt Corrective Action directive on Feb. 4 requiring the bank to achieve adequate capital levels by Feb. 28 and to demonstrate how it would maintain those levels after that date in response to the diminished capital level reported in the bank's Dec. 31 thrift financial report.

As an initial step, Lehman Brothers Holdings obtained court approval in February to restore the bank's diminished capital level.

In connection with satisfying the requirement to maintain the ongoing adequacy of the bank's capital, Lehman said it is now seeking authority to make one or more further capital contributions to the bank.

Lehman said the corrective action requires it, as the bank's ultimate holding company, to commit to make as-needed contributions of up to a total of $127 million to allow the bank to sustain capital for four consecutive quarters after Dec. 31.

Specifically, Lehman is seeking court approval to enhance the bank's capital by entering into an agreement to transfer all or part of a portfolio of its unencumbered mortgage servicing rights to Aurora Loan Services, LLC; entering into an agreement under which Lehman will convey ownership of funds to Aurora; investing up to $15 million in cash in one or more capital contributions; and terminating $1.38 billion of unfunded loan commitments with General Electric Capital Corp.

Lehman said that if the bank's capital level does fall below the adequacy requirements, the bank's regulators can take actions to restrict or control its activities, which could jeopardize the value of Lehman's equity interest.

New York-based Lehman Brothers Holdings was the fourth-largest investment bank in the United States. The company filed for bankruptcy on Sept. 15, 2008. Its Chapter 11 case number is 08-13555.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.