Lehman bank group member being liquidated; funds not paid as expected

By Caroline Salls

Pittsburgh, June 23 – Lehman Investment Banking Group member LB GP No. 1 Ltd.’s joint liquidators outlined plans for a liquidation of the company in a notice released Friday.

In addition, the joint liquidators said they are considering the creation of an informal investors’ committee.

The notice said the purpose of the establishment of five separate limited partnerships was to raise tier-one regulatory capital for the Lehman Brothers holding companies by issuing securities to investors.

The securities issued by the partnerships included €225 million of fixed-rate to CMS-linked guaranteed non-voting, non-cumulative perpetual preferred securities, €250 million of fixed-rate guaranteed non-voting, non-cumulative perpetual preferred securities, €500 million of fixed/floating-rate enhanced capital advantaged preferred securities, €200 million of euro fixed-rate enhanced capital advantaged preferred securities and $500 million fixed-rate enhanced capital advantaged preferred securities.

According to the notice, the liquidators were informed that Lehman Brothers Holdings, Inc. was holding cash that was expected to be paid to the liquidators in May. After the funds were paid, the liquidators said they intended to disclose the value of and apportionment of those funds to holders of securities in the company.

However, the liquidators said Lehman has not paid the funds as originally expected, and Lehman may make a claim to some or all of the funds in question.

As a result, the joint liquidators said they are investigating whether any of the partnerships are entitled to the funds. The liquidators are also investigating whether any of the partnerships have claims against third parties, particularly group entities in connection with the issuance and guarantee of subordinated notes.

“The values of any claims the partnerships may have are yet to be quantified, and the prospect of recovering any funds pursuant to any claims is very uncertain,” the notice said.

In addition to investigating the entitlement to any funds and the possibility of claims, the liquidators plan to meet with the former partnership administrator to take control of relevant documents, to meet with former accountants and attorneys to determine the scope of work professional advisers performed and whether they hold any information that is relevant to the wind-up, maintain an ongoing review of protective claims and determine whether any claims can be filed against the holding company related to the subordinated notes.

New York-based Lehman Brothers was the fourth-largest investment bank in the United States. The company emerged from bankruptcy on March 6, 2012.

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