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

GSAM's Papagiannis: Liquid Alternatives For The Long Run

Apr 21 2017 | 8:44pm ET

Interest in liquid alternatives cooled a bit last year amid a broad shift in investor...

Lifestyle

Aston Martin Returns To Debt Market As DB11 Drives Turnaround

Mar 31 2017 | 5:21pm ET

James Bond’s preferred carmaker is returning to the public debt markets for the...

Guest Contributor

Debunking Conventional Investment Wisdom (Part II)

Apr 17 2017 | 5:56pm ET

The alternative investment industry is currently replete with buzzwords around data...

 

From the current issue of