Lehman wins court approval of $5.3 billion loan management agreement

By Caroline Salls

Pittsburgh, Aug. 17 - Lehman Brothers Holdings Inc. received approval from the U.S. Bankruptcy Court for the Southern District of New York for an agreement under which WCAS Fraser Sullivan Investment Management will manage the company's $5.3 billion commercial loan portfolio, according to a WCAS Fraser Sullivan news release.

The portfolio includes $3.8 billion of commercial loans and $1.5 billion of unfunded loan commitments.

Under the agreement, WCAS Fraser Sullivan will transfer assets from the loan portfolio into a series of static collateralized loan obligations.

WCAS Fraser Sullivan said it expects to issue one or more CLO transactions involving collectively at least $500 million in loans within the next six months and one or more CLO transactions involving collectively at least an additional $500 million in loans within a year.

The CLOs are expected to monetize up to $2 billion of loan portfolio assets for the benefit of Lehman's estate and its creditors.

In addition, Lehman will retain the equity interests in the CLOs.

Also under the agreement, WCAS Fraser Sullivan will manage the portion of the portfolio that is deemed ineligible to be securitized, including the unfunded commitments and a small portion of the existing commercial loans.

"The agreement with WCAS Fraser Sullivan will provide for maximization of recovery value from our loan portfolio over the long term, while ensuring continuity of management who are aligned with the estate's mission to deliver that value back to creditors," liquidation manager Alvarez & Marsal managing director and Lehman Legacy Asset Management Co. (Lamco) chief executive officer Doug Lambert said in the release.

WCAS Fraser Sullivan said it will hire 10 current Lamco employees, including senior portfolio managers Frank Turner, Francis Chang and Patrick Marshall, to ensure seamless management and to avoid any impairment of the performance and value of the loan portfolio stemming from a disruption of the personnel managing the loans.

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.

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