Lehman reports 'steady progress' on several fronts; liquidity builds; investment options poor

By Caroline Salls

Pittsburgh, July 8 - Lehman Brothers Holdings, Inc. told its creditors Wednesday that the company has made steady progress on the asset management, claims management, financial reporting and litigation fronts during its bankruptcy and liquidation process, according to an 8-K filed with the Securities and Exchange Commission.

Lehman said its liquidity continues to build, "but permitted investment options are poor."

Lehman said its unfunded commitment obligations continue to be eliminated, and it has seen an improved market value on its loan portfolio.

The company said its major pending open issues include derivative claims, unfunded commitments, parent guaranteed debt and clearing bank claim treatment.

According to the filing, Dec. 31, 2008 balance sheets should be available in August, and the claims bar date has been set for Sept. 22. Lehman said it is still sorting through several guarantees and intercompany claims.

In addition, the company said there is significant activity underway on Bank of America and Barclays lawsuits in progress, and lawsuits are being developed for other institutions.

Lehman reported that there have been no surprises on the bank asset management front, as asset values are stabilizing.

However, since the Federal Deposit Insurance Corp. seems to be "changing the rules of the game," there has been no new CD issuance, resulting in a maturity mismatch between assets and debt.

The company's principal investments and private equity focus has been on stabilization and/or spin out of fund management companies, Lehman said in the report.

Also, Lehman said it has a close to $6 billion derivatives collection milestone, and the company is implementing a hedging/assigning strategy to lock up derivatives value.

As part of its commercial loan portfolio summary, Lehman said it has eliminated $13.6 billion of unfunded credit exposure and more than 81.9% of open trades have closed for proceeds of $257 million.

As of June 30, the Lehman debtors had a total cash and short-term investments balance of $12.219 billion, according to the filing. From the bankruptcy filing date through June 30, the company has recorded $1.832 billion in asset sale receipts.

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

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