Lehman looks to convert Archstone-Smith Trust cutoff loans to equity

By Caroline Salls

Pittsburgh, Nov. 2 - Lehman Brothers Holdings Inc. requested court approval to modify the terms of its Archstone credit facilities restructuring agreement to allow the company to convert additional pre-existing debt in Archstone to a new class of equity interests, according to a Tuesday filing with the U.S. Bankruptcy Court for the Southern District of New York.

As previously reported, in May the court approved a restructuring of the investments made in Archstone-Smith Trust by Lehman, affiliates of Bank of America and affiliates of Barclays Capital Real Estate Inc.

Under the restructuring, $5.2 billion principal amount of financing provided to Archstone was converted into new classes of new equity interests, which were entitled to a preferred return.

However, the restructuring is still being negotiated, and Lehman said it has made significant progress toward finalizing the agreement.

Under the proposed changes to the restructuring terms, $237 million of cutoff loans, which were originally slated to remain outstanding as a fully funded term loan, will be converted into equity instead of into a post-conversion term loan.

Lehman said the change will further reduce Archstone's debt levels.

New York-based Lehman Brothers Holdings Inc. 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.

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