Creditors’ claims against Lehman could reach $1 trillion, CEO says
NEW YORK - Lehman Brothers Holdings Inc.’s creditors filed $824 billion in bankruptcy claims against the collapsed investment bank, and the total may reach $1 trillion, chief executive Bryan Marsal said yesterday.
The company will probably need US Bankruptcy Judge James Peck to referee disputes over the actual value of some of the more than 64,000 claims, said Marsal, the turnaround expert from Alvarez & Marsal Inc. who took over from Richard Fuld.
“Some of the claim estimates are just flat-out silly,’’ Marsal said, adding that the biggest, most sophisticated financial firms Lehman did business with were the ones taking the hardest line on claims and damages.
Marsal’s team should have a good understanding of the claims situation by the end of November after it resolves some of the duplicate or erroneous claims, he said. The deadline to file claims was Sept. 22.
Lehman expects to outline a reorganization plan by March 31. While he will continue to push to have a plan to pay creditors ready by the second anniversary of the Lehman’s bankruptcy, Marsal said, he still will be “hard-pressed’’ to meet that goal.
Lehman, once the fourth-largest investment bank, filed for Chapter 11 protection on Sept. 15, 2008, listing $613 billion in debt.
The bank has said it foundered because of deteriorating subprime and structured investments.
As of yesterday, Lehman had $16 billion in cash, Marsal said, and isn’t commingling the money of the various Lehman units.
According to the presentation made to the court and filed with the Securities and Exchange Commission, Lehman’s private equity and principal investments had a market value of $8.3 billion on June 30, down from $14.3 billion before the bankruptcy filing.
Real estate assets stood at $14.4 billion, down from $23 billion at the time of the bankruptcy, according to Alvarez & Marsal’s report. To manage the real estate, Lehman hired 10 industry professionals in the past 90 days, expanding the team to 60.
Lehman’s unfunded loan obligations fell to $13 billion by Sept. 30, compared with $37.4 billion a year earlier.
Cash collected on derivative securities reached $8 billion by Nov. 6, compared with $5.8 billion on July 8, according to the report.
Meanwhile, the value of equity in Lehman’s Woodlands Bank unit rose to $645 million as of Sept. 30, from $628 million in June, the report said. The value of equity in Lehman’s Aurora Bank unit fell to $445 million as of Sept. 30, from $575 million in June.
Lehman previously contributed $185 million in securities to Aurora and agreed to buy as much as $325 million in mortgage securities and loan the bank as much as $500 million to keep regulators from seizing it and to protect Lehman’s equity interest.
