Lehman Brothers Files Bankruptcy
Wednesday, September 17, 2008
New York-based Lehman Brothers Holdings Inc. (“LBHI”), one of the world's largest investment banks, announced today that it is filing for Chapter 11 bankruptcy with the U.S. Bankruptcy Court for the Southern District of New York. The 158-year old financial firm's demise was brought about largely by losses from mortgage-related assets, and is being called the biggest bankruptcy filing in history.
Charles "Chuck" Tatelbaum, a bankruptcy lawyer with Adorno & Yoss in Florida and former editor of the American Bankruptcy Institute Journal, told Bloomberg News, "There is likely to be a domino effect as other firms and individuals who relied on Lehman for financing feel the effects of its meltdown. The whole thing is frankly frightening for the U.S. economy."
Lehman's Board of Directors authorized the filing of the Chapter 11 petition in order to protect its assets and maximize value, the company said in a statement to the press. 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, the company also stated.
In its press statement, the company explained that none of its broker-dealer or other LBHI subsidiaries will be included in the bankruptcy filing; subsidiaries 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. The companies' portfolio management, research, and operating functions remain intact, LBHI assured investors. 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.
LBHI is exploring the sale of its broker-dealer operations and is in advanced discussions with a number of potential purchasers to sell its Investment Management Division (“IMD”), according to the company.
Word on Wall Street is that Bank of America and the UK's Barclays PLC both pulled out of negotiations to purchase the troubled financial firm after Treasury Secretary Henry Paulson said the U.S. government would not guarantee Lehman's assets. Although the U.S. Department of Treasury and the Federal Reserve committed taxpayers' money to rescuing Bear Stearns back in March, Paulson said over the weekend that the administration had to draw the line somewhere, and he staunchly insisted that government money should not be used to resolve Lehman's problems.
Charles "Chuck" Tatelbaum, a bankruptcy lawyer with Adorno & Yoss in Florida and former editor of the American Bankruptcy Institute Journal, told Bloomberg News, "There is likely to be a domino effect as other firms and individuals who relied on Lehman for financing feel the effects of its meltdown. The whole thing is frankly frightening for the U.S. economy."
Lehman's Board of Directors authorized the filing of the Chapter 11 petition in order to protect its assets and maximize value, the company said in a statement to the press. 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, the company also stated.
In its press statement, the company explained that none of its broker-dealer or other LBHI subsidiaries will be included in the bankruptcy filing; subsidiaries 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. The companies' portfolio management, research, and operating functions remain intact, LBHI assured investors. 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.
LBHI is exploring the sale of its broker-dealer operations and is in advanced discussions with a number of potential purchasers to sell its Investment Management Division (“IMD”), according to the company.
Word on Wall Street is that Bank of America and the UK's Barclays PLC both pulled out of negotiations to purchase the troubled financial firm after Treasury Secretary Henry Paulson said the U.S. government would not guarantee Lehman's assets. Although the U.S. Department of Treasury and the Federal Reserve committed taxpayers' money to rescuing Bear Stearns back in March, Paulson said over the weekend that the administration had to draw the line somewhere, and he staunchly insisted that government money should not be used to resolve Lehman's problems.
