Lehman Bankruptcy Plan Aims To Please Hedge Fund Creditors

Mar 17 2010 | 12:17pm ET

The corpse of Lehman Brothers hopes to appease its hedge fund counterparties as it aims for a compromise acceptable to all creditors.

The bank, which collapsed in September 2008, filed its initial reorganization plan on Monday. Part of that plan is to resolve the firm’s “guarantee claims” with third-party creditors and affiliates, including hedge fund counterparties to Lehman’s derivatives trades. Success that on front could help the bankrupt bank reach one of its “core” goals: Avoiding lawsuits that could “exceed the actual liabilities to Lehman’s third parties on a worldwide basis.”

As it stands, Lehman could face lawsuits from both a counterparty and one of its subsidiaries on a single trade, which could double its liability.

“What we’re trying to do is 1) maximize value for all creditors and 2) expedite the return of assets to creditors as quickly as possible,” John Suckow, president and chief operating officer of what’s left of Lehman, told Reuters.

“We’re trying to put forward an economic settlement plan that avoids the litigation involved with a substantive consolidation approach and avoids litigation that would come from a case-by-case resolution,” he added.

Part of that plan would be to create a new company, called LAMCO, to manage what remains of Lehman’s assets, including private equity, commercial real estate, mortgages, principal investments, corporate debt and derivatives.


In Depth

Q&A: Sancus Capital And The Disruption Of The CLO Market

Oct 5 2017 | 6:28pm ET

Traditional collateralized loan obligation (CLO) funds in the U.S. market can offer...

Lifestyle

CFA Institute To Add Computer Science To Exam Curriculum

May 24 2017 | 9:25pm ET

Starting in 2019, financial industry executives sitting for the coveted Chartered...

Guest Contributor

Finding Success as Alternatives Converge

Oct 9 2017 | 4:00pm ET

Rising interest among institutional investors over the past several years has led...

 

From the current issue of