Lehman affiliates file Chapter 11 bankruptcy following interest sale

By Caroline Salls

Pittsburgh, Sept. 1 – Two Lehman Brothers Holdings Inc. affiliates, Lehman Brothers U.K. Holdings (Delaware) Inc. and Lehman Pass-Through Securities Inc., filed Chapter 11 bankruptcy on Thursday in the U.S. Bankruptcy Court for the Southern District of New York.

Lehman Brothers Holdings managing director Christopher Mosher said in a statement filed with the court that Brookfield Asset Management Inc. and the Lehman Brothers Holdings plan administrator agreed on a transaction that includes a planned restructuring in the cases of Lehman Brothers U.K. Holdings (Delaware) and Lehman Pass-Through.

On July 19, the parties entered into a stock and note purchase agreement, which closed on Aug. 10.

Under that agreement, a Brookfield affiliate bought 45% of the holding company’s common equity in Lehman Brothers U.K. Holdings (Delaware) and a $177.5 million unsecured receivable from that Lehman affiliate.

A Brookfield affiliate also acquired 45% of the holding company’s common equity interest in Lehman Pass-Through and a $45.8 million unsecured receivable.

At the close of the transaction, Mosher said Lehman Brothers Holdings unlocked and generated $485 million in cash proceeds plus up to an additional $80 million of contingent, deferred consideration based on future collection on an asset.

In addition, Mosher said Lehman may realize value over time for its remaining equity interest in the affiliates.

Mosher said the affiliates’ objectives in their Chapter 11 cases include confirming and finally establishing that the liabilities on their balance sheets are their only liabilities; identifying any unknown claims, executory contracts or unexpired leases that may exist; providing appropriate treatment for their respective obligations under a Chapter 11 plan; and preserving the value of their assets.

Providing certainty of the debtors’ liabilities and preservation of asset value will also enable the plan administrator to obtain the maximum value from the holding company’s remaining equity interests in the affiliates, Mosher said.

Lehman Brothers U.K. Holdings (Delaware) listed $500 million to $1 billion in assets and $100 million to $500 million in debt on its Chapter 11 petition, and Lehman Pass-Through listed $100 million to $500 million in assets and $50 million to $100 million of debt.

The companies are represented by Weil, Gotshal & Manges LLP.

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

Lehman Brothers U.K. Holdings (Delaware)’s and Lehman Pass-Through’s Chapter 11 cases are being jointly administered under case number 17-12442.

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