LEHMAN BR HOLDINGS : LEHsale 2 BARC challenged by Hedge Fund
22 sept. 2008•16:49
Lehman Sale to Barclays Challenged by Hedge Fund (Update1)
By Christopher Scinta
Sept. 22 (Bloomberg) -- Bay Harbour Management LC, a hedge fund that invests in the debt of bankrupt and distressed companies, challenged a court order approving the sale of Lehman Brothers Holdings Inc.'s North American business to Barclays Plc.
Bay Harbour didn't disclose the grounds for the appeal in a court filing today in U.S. Bankruptcy Court in New York. Bay Harbour and another hedge fund, Amber Capital, filed objections in Lehman's bankruptcy case last week, claiming $8 billion was improperly transferred out of the failed investment bank's European units prior to its collapse.
Bay Harbour, a customer of Lehman's prime brokerage business, said in a court filing that money it deposited with the New York-based bank ``appears to have been siphoned from London to the United States as part of an $8 billion asset transfer and then 'trapped' by the midnight bankruptcy filing.'' This happened, ``despite repeated assurances of the integrity of the cash,'' according to Bay Harbour's Sept. 19 objection.
Appeals of bankruptcy court orders usually go to the U.S. district court in that jurisdiction. Davis Rosner, an attorney for Bay Harbour, and Lehman's bankruptcy lawyer Harvey Miller didn't return calls seeking comment.
Lehman filed the largest bankruptcy in history on Sept. 15. The bank won approval from U.S. Bankruptcy Judge James Peck on Sept. 19 for the $1.75 billion sale to London-based Barclays. Peck overruled objections from New York-based Bay Harbour and other Lehman creditors who said the sale was moving too quickly.
While Peck's approval was intended to clear the way for Barclays, the U.K.'s third-biggest bank, to quickly complete the transaction, appeals may slow that process. All creditors who filed an objection to the sale may appeal.
The case is In re Lehman Brothers Holdings Inc., 08-13555, U.S. Bankruptcy Court, Southern District of New York (Manhattan).
To contact the reporter on this story: Christopher Scinta in New York bankruptcy court at email@example.com.
U.K. Seeks Return of $8B Lehman Transfer
|Published: September 22, 2008
DON (Dow Jones) -- U.K. Prime Minister Gordon Brown said he is working with U.S. authorities to get billions of dollars returned to Lehman Brothers Holdings Inc.'s London operations from the firm's U.S. business.
Responding to questions at the start of his Labour Party's conference Saturday, Mr. Brown said he wanted to make sure the money was returned in the interest of the investment bank's U.K. employees.
The transfer of $8 billion has become a target of inquiry by Lehman clients as well as PricewaterhouseCoopers LLP, which is overseeing the insolvency proceedings of Lehman units in London.
Within the past several days, PricewaterhouseCoopers sent a letter to a Lehman U.S. unit to seek repayment of the money. At least two Lehman clients have said in court filings that Lehman's bankruptcy proceedings moved so quickly that there wasn't enough time to assess Lehman money flows before Lehman filed for Chapter 11 bankruptcy protection on Sept. 15.
Lehman subsequently reached an agreement to sell the bulk of its North American operations to the U.K.'s Barclays PLC. Lehman received approval Friday in federal bankruptcy court in New York to sell off much of its North American operations to Barclays.
Mr. Brown's move to reclaim the money comes amid the growing realization that Lehman's London operations appear to have been left without adequate funding when the parent firm filed for bankruptcy.
Clients and accountants are probing how Lehman moved the money just ahead of its bankruptcy filing last week. At issue: whether transferring the $8 billion to New York was an effort to shore up the unit there so it could be sold at the expense of the London office, a person familiar with the matter said.
The money transfer to New York is raising questions about the speed and haste of Lehman's efforts to file for bankruptcy and complete a sale to Barclays. Lawyers for Lehman argued in court Friday there was no time to wait for the bankruptcy filing.
They argued that the firm's broker-dealer customers and its employees, mostly in its investment bank, are in danger of disappearing with each passing day.
Lehman's holding company filed for Chapter 11 bankruptcy protection last Monday, but the firm's U.S. broker-dealer stayed in business long enough for Barclays to arrange the purchase of assets including Lehman's brand name, technology, 10,000 employees, midtown Manhattan offices and two New Jersey sites.
As the largest bankruptcy filing in U.S. history, the Lehman case is marked by an unusual rush and lack of public disclosure about what specifically was being sold to Barclays. Lawyers representing the U.S. Federal Reserve, Treasury Department, Securities and Exchange Commission and U.S. Trustee's office all stood up in court to urge the judge to authorize the sale, arguing the global financial markets would be harmed by a delay.
On Friday, angry creditors pushed and shoved to get into Judge James M. Peck's court. On several occasions a security guard yelled at the crowd. Harvey Miller, lead counsel for Lehman on the bankruptcy filing, needed someone to clear a path for him to get in the room and to the front of the court.
Lehman sought court approval for the sale to Barclays, despite objections raised in court documents by companies such as Verizon Communications Inc., Occidental Energy Marketing Inc. and hedge-fund firm Harbinger Capital Partners. One creditor made a motion to the court pleading for a delay. "Here there has been hardly a moment to breathe," the court filing said.
In approving the deal, Judge Peck said that rejecting it "could prove to be truly disastrous" given the jobs and customer accounts at stake. "Lehman Brothers became a victim, in effect the only true icon to fall in the tsunami that has befallen the credit markets, and it saddens me. I feel I have a responsibility to all of the creditors, to all of the employees, to all of the customers, and to all of you," the judge said.
On Friday, there were a number of changes to the terms of the sale to Barclays. The originally agreed total sale price of $1.75 billion could be lowered by $100 million to $200 million. The British bank will take on $47.4 billion in assets and $45.5 billion in liabilities, instead of $72 billion in assets and $68 billion in liabilities. The drop in the assets reflects the decline in the value of Lehman securities during the past week.
The purchase price was lowered because of lower appraisals of real estate in New Jersey. Barclays will get a license on Lehman's name for two years, instead of permanently. Barclays will now keep any profits from the sale of any assets; previously, Barclays was to give Lehman's estate the first $500 million in any profits and split the profits on the next $500 million in sales.
Lehman's lawyers said at Friday's hearing that Barclays also has agreed to purchase Lehman's private-investment-management business, a brokerage unit within the firm's asset-management arm. Private-equity firms Bain Capital LLC and Hellman & Friedman LLC are expected to reach an agreement in the coming days to acquire other parts of Lehman's asset-management business, including money manager Neuberger Berman.
A New York investment fund and Lehman client, Amber Capital Investment Management, made a filing Friday afternoon raising concerns that some $8 billion was "misappropriated" from Lehman Brothers International (Europe) to Lehman in the U.S. just before the filing. Amber asked the judge to set aside the proceeds from the Barclays sale while the $8 billion transfer is investigated.
According to PricewaterhouseCoopers and Lehman executives, monies residing in Lehman units based in Europe or Asia typically were swept up each day and transferred to Lehman's group treasury in New York. The money was later dispatched back out to the units. Spokesmen for Barclays and Lehman declined to comment.
-- Alistair MacDonald, Carrick Mollenkamp and Jeffrey McCracken, The Wall Street Journal
(Peter Lattman, Chad Bray and David McClaughlin contributed to this article.)
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