Wednesday, January 14, 2009

Lehman Posts Bankruptcy Status Update

Once the 4th largest investment bank in the U.S., and the house that Dick Fuld built, Lehman Brothers' today posted an update of its reorganization status in an 8K with the SEC. In a very interesting analysis by Alvarez & Marsal, several things become obvious. Among the more noteable are: the debtors' objective is to emerge from bankruptcy in 18-24 months (vs. others' estimates that the unwind of the estate could last as long as 10 years), the total value of planes that Lehman has owned is $164 million and Lehman's artwork adds another $30 million.

Among facts stated which are actually relevant for creditors are:
  • Total headcount has been reduced from 25,158 at filing 9/15/2008 to 4,142 at 1/1/2009

  • A&M has 6 asset teams in place with defined tasks/plans

  • Cash position has grown from $3.3 billion at filing to almost $7 billion on 1/2/2009

  • Cash generated from asset sales is $1.7 billion consisting of $1.3 billion Barclays sale, $0.2 billion sale of Eagle Energy, and $0.1 billion R3 sale (Ed. to mega insider Rick Rieder)

  • $145 million generated from subsidiary receipts, $86 million from investments and $17 from other.

  • All this was offset by $293 million to keep the liquidation "operating"

  • Lehman's loan portfolio at end of 2008 was $33 billion retianed and $8.4 billion pledged

  • Reduced continget liability: unfunded commitments have been reduced by $6.3 billion (20%) mitigating potential claim exposure

  • Carrying value of its 1,409 private equity principal investments was $12.3 billion

  • Interestingly, total Real Estate Assets, allegedly the rotten fruit that was the cause of all this shebang, were valued at $42.9 billion (of which residential was only $3.4 billion, and the balance is commercial real estates spread among North America, Europe and Asia)

  • Currently Lehman notes it has 45 legacy commercial real estate teams in place, 3 residential, and 8 corporate

  • Lehman's derivatives book has been successful in collecting $2 billion in cash as of 1/2/2009; Curiously in the Deriv Book, there was $23.8 billion of receivables at petition with 3,930 ISDA counterparties (of this $14.3 billion, or 1,808 counterparties has been terminated)

  • Neuberger Berman sale results in a $1.8 billion realized investment: $1 billion in retained stock and $0.8 billion in retained cash

  • And of course the other assets, which are probably most interesting to our readers, which include a 2008 G550 airplane, 3 CRJ 200s, one Boeing 767 and one Sikorsky 76C

Lehman's bonds have recently traded at about 12 cents on the dollar indicating the market is expecting recoveries of around $16 billion on the roughly $150-160 billion of unsecured claims. Seems that if A&M continues doing their job efficiently (which is a change from prior sentiment, with bondholders using some very fancy expletives when referring to Bryan Marsal previously), then these bonds could actually run up quite a bit even in this horrendous environment. Also at 3pm Judge Peck appointed an examiner in the Lehman bankrtupcy case... Depending on just how big of a fan of Dick Fuld the examiner may be, all the actions of the Gorilla taken just before the bankruptcy may end up having a pretty Madoffesque impact on his current freely-roaming lifestyle.

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