The FINANCIAL — Lehman Brothers Holdings Inc. (“LBHI”) announced today that it intends to file a petition under Chapter 11 of the U.S. Bankruptcy Code with the United States Bankruptcy Court for the Southern District of New York, company official statement says.
None of the broker-dealer subsidiaries or other subsidiaries of LBHI will be included in the Chapter 11 filing and all of the broker-dealers will continue to operate. Customers of Lehman Brothers, including customers of its wholly owned subsidiary, Neuberger Berman Holdings, LLC, may continue to trade or take other actions with respect to their accounts.
The Board of Directors of LBHI authorized the filing of the Chapter 11 petition in order to protect its assets and maximize value. In conjunction with the filing, LBHI intends to file a variety of first day motions that will allow it to continue to manage operations in the ordinary course. Those motions include requests to make wage and salary payments and continue other benefits to its employees.
LBHI is exploring the sale of its broker-dealer operations and, as previously announced, is in advanced discussions with a number of potential purchasers to sell its Investment Management Division (“IMD”). LBHI intends to pursue those discussions as well as a number of other strategic alternatives.
Company said Neuberger Berman, LLC and Lehman Brothers Asset Management will continue to conduct business as usual and will not be subject to the bankruptcy case of its parent, and its portfolio management, research and operating functions remain intact. In addition, fully paid securities of customers of Neuberger Berman are segregated from the assets of Lehman Brothers and are not subject to the claims of Lehman Brothers Holdings’ creditors.
Lehman Brothers (ticker symbol: LEH) is headquartered in New York, with regional headquarters in London and Tokyo, and operates in a network of offices around the world.
According to Times Online, US authorities had tried to secure a rescue deal for Lehman Brothers over the weekend.
"Mr Paulson and Tim Geithner, president of the New York Federal Reserve Bank, had convened an emergency meeting in New York on Friday evening to try to convince other banks to bail out Lehman", writes Times Online in todays issue..
"At the same time, the Merrill Lynch board, led by John Thain, agreed to be bought by Bank of America, the mortgage provider for around $29 a share, well above the $17.05 that Merrill Lynch stock closed at on Friday evening but well above the $97 they fetched in January 2007. It is understood that both boards have approved the all shares deal.
"The deal will see Merrill Lynch, which has been dogged by questions over its mortgage-backed securities, protected by Bank of America's substantial current account, credit card and lending businesses.
"American authorities had hoped to ringfence $85 billion worth of Lehman's real estate assets into one company which they wanted banks such as Citigroup and JP Morgan Chase to prop up with $35 billion of new capital.
"Mr Paulson had hoped to persuade the banks to inject new money to prevent a fire sale of Lehman's assets, a move which could have triggered a fall in the value of their own securities.
"At the same time, Mr Paulson had tried to sell off Lehman's investment bank to either Bank of America or Barclays. However, both walked away at the weekend after Mr Paulson refused to bankroll a possible bailout of Lehman with taxpayer funds.
"On Sunday evening, Lehman Brothers, whose shares have fallen about 94 per cent over the year, was left in a vulnerable position".
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