Judge Peck Approves Barclays' Purchase of Lehman's Broker-Dealer Subsidiary
9/22/08 Update: Here's the final complete Asset Purchase Agreement (including First Amendment and Clarification Letter). Also, this notice of appeal was filed by Bay Harbour Management and others. Here and here are the best news reports I've seen describing the surreal hearing.
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Just after midnight early today, Judge Peck entered this order approving the sale of Lehman's broker-dealer subsidiary (LBI) to Barclays and overruling all objections to the sale (identified here). Note the reference in the order to a first amendment to the asset purchase agreement and to a subsequent letter agreement modifying the original asset purchase agreement. Neither of these amendments have yet been posted, but the net effect of them appears to have resulted in a $400 million reduction in the purchase price, according to this news report.
The "Purchased Assets" were sold free and clear of "Interests," including "those that purport to give any party a right or option to effect any forfeiture, modification or termination of the Debtors' interests in the Purchased Assets." Interests also presumably include the Lehman Europe Joint Administrators' demand (described here) for a return of the $8 billion in overnight funds swept by the Debtor in advance of the filing (though it's doubtful that any of those funds actually went into LBI and thus would be implicated by the sale).
The order also expressly released Barclays from any potential successor liability claims, including taxes, which means that the Debtors will be stuck paying the transfer taxes (to the glee of New York State, per this recent Supreme Court case). Counterparties to contracts being assumed will have until 10/3/08 to file an objection to the proposed cure amount.
The sweeping change in the economic and political landscape after the announcement of the government's bailout prompted Debtor's counsel to say in Court that "[t]his is a tragedy - maybe we missed the RTC by a week," to which Judge Peck responded, "[t]hat occurred to me, as well; Lehman Brothers became a victim, in effect the only true icon to fall in the tsunami that has befallen the credit markets." But, as Rod Stewart sang, no one's gonna help "a victim of a shotgun wedding."
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The inset cartoon is from the Business Cartoon Collection of Shannon Burns, to whom special thanks is owed for granting me permission to post it here.
© Steve Jakubowski 2008
I am working on bankruptcy law reform in Indonesia and I wanted to thank you for all the materials and insights you have made available on the Lehman Brothers' proceeding. As unfortunate as the whole affair is, I am pointing to various aspects of the case to raise awareness of the need for bankruptcy reform here. My question: how are you getting such quick access to the documents/pleadings? Lack of access to bankruptcy documents is a huge obstacle to constructive creditor participation in Indonesia and anything I can point to as practical and efficient methods to improve transparency would be especially helpful.
Is there any information on the sale of the other Lehman US affiliates? Do you know if Lehman is going to include them into the Lehman Brother's Holding bankruptcy?
Thank you for all the information on the Lehman Brothers case. Business bankruptcy is never a simple matter.