Lehman Brothers Bankruptcy Destroys Billions
The chaotic and unplanned bankruptcy of Lehman Brothers in September has destroyed as much as $75 billion in the value of the company. A bankruptcy filing that was less chaotic would have saved their value by tens of billions, according to Alvarez & Marsal, an advisory firm. A less-hurried filing would have let Lehman Brothers sell some of their assets outside of protection from federal bankruptcy court, as well as given them time to unwind their derivatives portfolio so that they could preserve their value.
It is too soon to tell how much the creditors of Lehman Brothers will be able to salvage during the bankruptcy process. Creditors that are unsecured have said in court filings they are owed around $200 billion, and the bond market has projected a $20 billion recovery for those creditors. The unsecured creditors include Pension Benefit Guaranty Corp., which is the pension-insurance arm of the federal government, as well as the Bank of New York and the depositor-insurance arm of the German government.
Bryan Marsal, the Chief Restructuring Officer of Lehman Brothers, said that the company should have pursued an orderly wind-down plan when the decision was made by the federal government to discontinue further assistance to the firm. He predicts that $50 billion to $75 billion in value of the company will be lost. Most of the company’s value was destroyed when they filed for bankruptcy, which triggered a domino effect, resulting in 80% of counter-party transactions being terminated. In all, 900,000 derivatives contracts were canceled.
Learn more about this firm at: www.lehman.com
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