Lehman Brothers seeks to monetize equity in Neuberger at $845 million

By Jim Witters

Wilmington, Del., Nov. 9 - Lehman Brothers Holdings Inc. is seeking court approval to monetize its equity interests in Neuberger Berman Group LLC through a series of transactions, according to documents filed Wednesday with the U.S. Bankruptcy Court for the Southern District of New York.

"The proposed transaction is expected to generate in excess of approximately $845 million at closing from the redemption of and final dividend on the sellers' preferred equity in NBG," the documents stated.

A hearing is scheduled for 10 a.m. ET on Nov. 30.

Lehman had sought to sell Neuberger Berman and its investment management business before the bankruptcy case began. The company negotiated a stalking-horse offer in October 2008 that would have yielded $745 million, the court documents stated.

In December 2008, Lehman developed an alternative strategy that led to Lehman and some of its non-debtor affiliates receiving 93% of the preferred equity with a face value of $814 million and 49% of the common equity in the newly formed Neuberger Berman Group LLC.

As the bankruptcy case progressed, Lehman has been negotiating with Neuberger, resulting in a term sheet outlining a series of transactions.

"The series of proposed transactions would result in (a) a redemption at par of the sellers' preferred equity in NBG, (b) a potential repurchase of a portion of the sellers' common equity in NBG at closing, and (c) a defined path to monetize the sellers' remaining common equity in NBG, including mandatory annual repurchases and a defined timeline by which all common equity must be repurchased," court documents stated.

In addition to the $845 million at closing, "concurrent and future repurchases of common equity are expected to yield approximately $300 million to $450 million or more of proceeds," court documents stated.

"Inclusive of approximately $160 million in preferred dividends and tax distributions that the sellers have already received, the sellers stand to recognize approximately $1.3 billion to $1.5 billion in aggregate proceeds from their investment in NBG through the time of closing," the documents stated.

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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