The Lehman Brothers’ Bankruptcy – What Does It Mean to Creditors? What Remedies Are Available?
- United States
- 10/28/2008
The Lehman Brothers’ crisis has adversely affected many businesses and individuals within the United States and abroad in numerous ways. We, together with our Duane Morris colleagues, are involved in several matters seeking redress for clients who have existing and potential claims and are closely monitoring the rapidly unfolding legal issues. These matters include:
- Protecting counterparties to derivative contracts involving Lehman Brothers
(including Credit Default Swaps) from the operation of the automatic stay.
- Investor claims in Lehman Brothers’ funds.
- Submission of claims in multi-jurisdictional bankruptcy proceedings.
Below for your information is a brief summary of the current status of the Lehman Brothers Holdings, Inc. and Lehman Brothers Treasury Co. B.V. bankruptcy proceedings.
We are available to answer any questions you may have regarding the Lehman proceedings and what actions you, your clients or associates can take to enforce your rights, within or outside the United States.
Lehman Brothers Holdings, Inc.
Lehman Brothers Holdings, Inc. (“LBHI”), the fourth largest investment bank in the United States, and LB 745 LLC filed petitions seeking relief under chapter 11 of the U.S. Bankruptcy Code on Monday, September 15, 2008. LBHI’s bankruptcy petition listed $639 billion in assets and $613 billion in debts, effectively making the firm’s bankruptcy filing the largest in U.S. history. Lehman Brothers International (Europe), the principal UK trading company in the Lehman group, was placed into administration, together with Lehman Brothers Ltd, LB Holdings PLC and LB UK RE Holdings Ltd.
As contemplated under the terms of the asset purchase agreement discussed below, on Friday, September 19, 2008, Securities Investor Protection Corporation (“SIPC”) initiated a liquidation of Lehman Brothers, Inc. (“LBI”) under the Securities Investor Protection Act of 1970 (“SIPA”). This proceeding was instituted to transfer assets from 639,000 Lehman customer accounts, about 130,000 of which are owned by individual investors, to Barclays Bank Plc (“Barclays”) accounts, among other reasons.
15 U.S.C. Section 78eee(a)(3)(A) provides that the SIPC may file an application for a protective decree with the U.S. district court if the SIPC determines that any member has failed or is in danger of failing to meet obligations to customers and meets one of the four conditions specified in 15 U.S.C. Section 78eee(b)(1). This application is filed as a civil case in which the SIPC or the SEC or both are named as plaintiff, and the member securities firm is named as the debtor-defendant. In the event that the SIPC refuses to act under the SIPA, the SEC may apply to the U.S. District Court for the District of Columbia to require the SIPC to discharge its obligations under the SIPA. 15 U.S.C. Section 78ggg(b). By contrast, customers of failing broker-dealers do not have an implied right of action under the SIPA to compel the SIPC to exercise its statutory authority for their benefit.
Lehman Brothers Treasury Co. B.V.
Lehman Brothers Treasury Co. B.V. (“LBT”) is a private company with limited liability incorporated under Dutch law with its registered office in Amsterdam, the Netherlands. LBT is a fully-owned subsidiary of Lehman Brothers UK Holdings (Delaware) Inc., which company is fully owned by LBHI. On September 19, 2008, the Amsterdam District Court granted LBT provisional suspension of payment. On October 8, 2008, the Amsterdam District Court revoked the provisional suspension of payment and declared LBT bankrupt. A bankruptcy trustee was appointed. A creditors’ meeting originally scheduled for December 10, 2008, has been cancelled, and no date has yet been set for a claims admission meeting.
The primary business of LBT is the issuance of notes under several programs and the on-lending to group companies. The note issuance documentation indicates that the notes were issued for general corporate purposes of LBHI and its group companies. According to the first notice to creditors these notes generally will have the benefit of a guarantee of LBHI. As of the date thereof, LBT was not to be involved in the sale of certain activities of LBHI to Barclays or other parties.
Comment
- Joanhanes Fritz
- 11/21/2008
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Quite impressive. Very good and short information straigh to the point. Congratulations
