Bankruptcy Court Hearing Regarding Sale of Lehman’s Investment Management Division
In a hearing yesterday, Judge James Peck of the U.S. Bankruptcy Court for the Southern District of New York approved the bidding procedures for the proposed sale of Lehman Brothers’ Investment Management Division (IMD), which includes asset management subsidiary Neuberger Berman and certain fixed income and alternative asset management businesses, to two private equity firms, Bain Capital Partners, LLC and Heller & Freidman LLC. The approved sale procedures include various bid protections for the two firms, including a $52.5 million break-up fee, the ability to make price adjustments upon the occurrence of certain events, and the ability to solicit consent from the firm’s clients prior to the auction. Under the amended and restated agreement entered into between the parties on October 3, 2008, the two private equity firms would pay an aggregate purchase price of $2.15 billion, subject to pre- and post-closing adjustments, for Lehman’s IMD businesses. Prior to the objection deadline earlier this week, private equity firm The Carlyle Group and former Neuberger CEO Jeffrey Lane filed an objection to the proposed sale with the bankruptcy court, and announced its intention to bid for all or part of the assets constituting Lehman’s IMD businesses. The Carlyle Group claimed that the purchase price of $2.15 billion to be paid by Bain Capital and Heller & Friedman violated Lehman’s obligation to maximize the value of its asset sales to pay off its creditors because the adjustments to the purchase price would likely total in excess of $1 billion. Lehman replied to these objections, claiming that the deal would achieve maximum recovery and be in the best interests of Lehman and its economic stakeholders, a view apparently held by Judge Peck as well. During the hearing, Judge Peck also approved the sale of Lehman’s 45% stake in hedge fund R3 Capital Partners to the other owners of the hedge fund.
Additionally, according to various news reports covering the hearing, attorney Harvey Miller for Lehman Brothers Holdings Inc. stated that prosecutors in the U.S. attorney’s offices in New York and New Jersey have launched three grand jury investigations into the collapse of Lehman.
Acquisitions of Lehman Entities by Nomura Holdings
Last week Nomura Holdings, Inc. announced that its acquisition of Lehman Brothers’ investment banking and equities businesses in Europe and the Middle East would become legally effective on October 13, 2008, as the fulfillment of all closing conditions had been met. Nomura also announced earlier this week that it had closed the acquisition of a majority of Lehman Brothers’ Asia-Pacific franchise, including Hong Kong, Singapore, Australia, Thailand and Japan, following the fulfillment of closing conditions in each country. According to Nomura, a majority of Lehman employees have accepted offers of employment with Nomura in Europe, the Middle East and the Asian-Pacific region. Nomura also recently announced that it had entered into an agreement with Lehman Brothers Holdings Inc. to acquire Lehman Brothers Services India Private Limited, Lehman Brothers Financial Services (India) Private Limited, and Lehman Brothers Structured Finance Services Private Limited, all specialized IT support service companies based in Mumbai. In addition, all assets and issued and outstanding shares of these three companies will be purchased by Nomura.
Actions in Hong Kong Regarding Lehman Derivatives and Investment Products
Today, member banks of the Hong Kong Association of Banks (HKAB) announced agreement to a government proposal under which they would be required to buy back Lehman derivatives, known in Hong Kong as “minibonds,” at market value. HKAB has appointed Ernst & Young as the independent financial adviser responsible for the buy-back process, including the establishment of monetary value. In a parallel move, the Hong Kong Monetary Authority (HKMA) announced its appointment of PricewaterhouseCoopers to review the buy-back process, to ensure that investors received fair treatment. HKMA also announced today that it had referred 24 cases involving complaints of alleged misconduct with respect to Lehman investment products to the Securities and Futures Commission. HKMA reported that, as of October 16, 2008, it had received over 12,000 complaints concerning Lehman-related investment products.
Acquisition of Lehman Assets in Brazil by BTG
It has been reported that the Brazilian investment firm Banking & Trading Group (BTG), founded earlier this year by former UBS banker Andre Esteves, acquired the Brazilian operations and assets of Lehman Brothers Holdings Inc. earlier this week. The value of the transaction has not been disclosed, though various news sources report that BTG said it will withdraw Lehman’s request to operate in Brazil as an investment bank.
All of the documents related to these bankruptcy proceedings can be found by clicking on the following link: http://chapter11.epiqsystems.com/clientdefault.aspx?pk=de7ced2b-52e7-4172-92e1-9ec425933bd0&l=1.