Lehman party in interest Disney asks court to appoint examiner to answer questions on creditor losses

By Caroline Salls

Pittsburgh, Oct. 20 - Lehman Brothers Holdings, Inc. party in interest the Walt Disney Co. asked the U.S. Bankruptcy Court for the Southern District of New York to appoint an examiner for the company's Chapter 11 bankruptcy case, according to a Monday court filing.

Disney said Lehman debtor Lehman Brothers Commercial Corp. owed it roughly $92 million on its bankruptcy filing date. Those obligations are guaranteed by the holding company.

"When creditors lose money, they deserve to know why and how," Disney said in the motion.

"Creditors of LBHI deserve an examiner's public report of an investigation into how and why LBHI's guaranties of its subsidiaries' debts lost value."

According to the motion, the pre-bankruptcy and post-bankruptcy conduct of business by Lehman Brothers Holdings and its direct and indirect subsidiaries "gives rise to numerous important issues impacting TWDC as well as other creditors holding unsecured claims against the subsidiaries."

Specifically, Disney questioned whether Lehman Brothers Commercial's money was swept up to a master account owned by Lehman Brothers Holdings and the amount of Lehman Brothers Commercial's claim against the holding company.

Disney said Lehman Brothers Commercial's claim would be an administrative claim payable in full in cash.

"If LBCC's money was instead loaned to other entities, will the other entities repay LBCC in full?" Disney asked in the motion.

Disney also questioned whether Lehman Brothers Commercial and the holding company shared officers and directors, and whether those officers and directors breached their duty of loyalty to Lehman Brothers Commercial by depriving it of money it needed for its creditors while favoring other Lehman Brothers entities.

If Lehman Brothers Commercial did have independent officers and directors, Disney questioned whether they breached their duty to the company "by engaging in gross negligence or willful misconduct by sacrificing LBCC's cash for the benefit of other entities without receiving reasonably equivalent value in exchange."

Disney also questioned in its motion what statements Lehman Brothers Commercial's officers and directors took to protect its assets and businesses in connection with the sale of the holding company's assets.

A hearing is scheduled for Nov. 5.

New York-based Lehman Brothers Holdings, the fourth largest U.S. investment bank, filed for bankruptcy on Sept. 15. Its Chapter 11 case number is 08-13555.

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