Lehman Brothers (LEH)

Re: Lehman LEH

Postby millionairemind » Thu Nov 27, 2008 3:52 pm

Lehman’s Asia risk is revealed
By Sundeep Tucker in Hong Kong

Published: November 26 2008 23:48 | Last updated: November 26 2008 23:48

Lehman Brothers built up a huge balance sheet exposure to Asian property in the form of loans and investments worth billions of dollars, the liquidators of the Hong Kong subsidiaries of the collapsed bank have revealed.

The book value of Lehman’s property exposure in Thailand alone is $1bn, while the bank’s Hong Kong units racked up a further $1bn exposure with about 100 loans or direct real estate investments across the region.

The subsidiaries also made inter-company transfers worth $5bn to the bank’s Japanese arm, which were invested in domestic property assets, while one Asian investment vehicle has a $500m position in Taiwan’s landmark high-speed rail project

The disclosures were made during an exclusive Financial Times interview with KPMG, the professional services firm appointed by the Hong Kong courts in September to oversee the liquidation of the bank’s local units.

The revelations offer a rare inside glimpse into the activities of Lehman’s internal operations.

Paul Brough, KPMG Asia head of financial advisory services, said: “We have worked on many of the biggest liquidations in the region over the past two decades and this one is by far the most complex and challenging.”

KPMG is liquidating eight main Lehman entities registered in Hong Kong, which were responsible for the bulk of the bank’s non-Japanese operations in the region. The book value of assets belonging to these eight entities is up to $20bn. KPMG is yet to estimate what creditors are owed.

KPMG is about to begin the sale of Lehman assets and expects to hold the first creditor meeting for the Hong Kong-related entities in the new year.

Eddie Middleton, KPMG head of restructuring services, said there was no indication to date that the Hong Kong entities had transferred large amounts of money to the bank’s US holding company in the days ahead of the collapse, as had happened in the UK, and few clients had demanded access to Lehman’s now-frozen nominee trading accounts.

The bank’s liquidation has been complicated by its dismemberment and the different insolvency regimes governing its global operations. In recent days, KPMG partners have met their counterparts at PwC, administrators of Lehman’s UK arm, and Alvarez & Marsal, the firm restructuring the US assets, to discuss how to minimise the possibility of litigation relating to inter-company transfers.
Copyright The Financial Times Limited 2008
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Re: Lehman (LEH)

Postby millionairemind » Tue Dec 30, 2008 4:54 pm

From The Times
December 30, 2008
Lehman Brothers chiefs' lack of plan cost creditors $75bn
Christine Seib in New York

d**k Fuld, the ousted chairman and chief executive of Lehman Brothers, and his deputies cost creditors as much as $75 billion (£51.5 billion) by rushing the stricken investment bank into a bankruptcy filing, an analysis by liquidators has found.

Bryan Marsal, co-chief executive of Alvarez & Marsal (A&M), which is restructuring Lehman, described the bank's unexpected collapse on September 15 as “unconscionable waste of value”. Mr Marsal's report estimates that between $50 billion and $75 billion of assets that could have been used to repay unsecured creditors were wasted because Lehman did not have a clear plan to wind down the bank.

A&M was hired by Lehman's board at 10.30pm on September 14, hours before Lehman made the biggest bankruptcy filing in American history. The US Government had refused to bail out Lehman as it had Bear Stearns in March and Mr Fuld's pleas to rivals, including Bank of America, to buy the business had fallen on deaf ears.

Mr Fuld had spent months assuring investors that the bank was financially sound, while turning away offers that he considered too low. In his first internal report, Mr Marsal made a series of damning accusations about the actions of top Lehman executives in the lead-up to the bank's collapse.

Mr Marsal said: “This [bankruptcy]filing, which was pretty much dictated to the board of directors at Lehman that weekend, occurred with no planning. Had rules of crisis management been followed, much of the value that was lost by the unsecured creditors would have been prevented.

“While I have no position on whether or not the Federal Government should have provided further assistance, once the decision was made not to provide it, an orderly wind-down plan should have been pursued.”

Lehman's unsecured creditors are owed an estimated $200 billion but are expected to recover only $20 billion, ten cents on the dollar, once the restructuring is complete. A&M found that most of the loss of value had occurred because the bankruptcy filing caused the bank to default on trading contracts with counterparties, cancelling about 900,000 derivatives contracts. These included contracts in which Lehman was owed money. In an orderly unwinding, at least $50 billion could have been saved, A&M found.

Further value was destroyed when the unplanned bankruptcy forced down prices for Lehman's assets in a market already artificially depressed by the shock collapse of the bank. This meant that the trading and investment banking businesses were sold for less than $500 million although they had made about $4 billion annual profits before the bankruptcy.

About 150 A&M liquidation experts are working at Lehman's New York, London and Hong Kong offices to ascertain what assets can be salvaged for creditors. Mr Marsal will take over as Lehman's chief executive when Mr Fuld stands down at the year-end.
"If a speculator is correct half of the time, he is hitting a good average. Even being right 3 or 4 times out of 10 should yield a person a fortune if he has the sense to cut his losses quickly on the ventures where he has been wrong" - Bernard Baruch

Disclaimer - The author may at times own some of the stocks mentioned in this forum. All discussions are NOT to be construed as buy/sell recommendations. Readers are advised to do their own research and analysis.
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