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| 8-K - FORM 8-K - LEHMAN BROTHERS HOLDINGS INC. PLAN TRUST | d8k.htm |
 ©
Copyright 2011. Alvarez & Marsal Holdings, LLC. All Rights Reserved.
L E A D E R S H I P
P R O B L E M SO L V I N G
V A L U E C R E A T I O N
Lehman Brothers Holdings Inc.
Plan Status Report
January 13, 2011
Exhibit 99.1 |
 1
The
information
and
data
included
in
this
report
are
derived
from
sources
available
to
Lehman
Brothers
Holdings
Inc.
and
its
subsidiaries
that
have
filed
proceedings
under
chapter
11
of
the
Bankruptcy
Code
(collectively,
the
"Debtors").
The
Debtors
have
prepared
this
presentation
based
on
the
information
available
to
them
at
this
time,
but
note
that
such
information
is
incomplete
and
may
be
materially
deficient
in
certain
respects.
This
report
was
prepared
by
the
Debtors
for
purposes
of
presenting
the
Court
with
a
status
of
their
respective
estates
as
of
the
date
of
the
presentation
and
is
not
meant
to
be
relied
upon
by
investors
or
others
as
a
complete
description
of
the
Debtors’
estates,
businesses,
condition
(financial
or
otherwise),
results
of
operations,
prospects,
assets
or
liabilities.
The
information
in
this
presentation
may
only
be
updated,
including
any
corrections,
in
connection
with
future
presentations
or filings with
the
Court.
Certain
prior
period
balances
in
this presentation may have
changed from amounts
previously
presented,
which
may
be
a
result
of
certain reclassifications made;
refer to the footnotes herein accordingly. The Debtors reserve all rights to revise
this report. All amounts are
unaudited
and
subject
to
revision.
This
report
is
also available
on
the
website
that
hosts
information
about
the
Debtors
at
www.lehman-
docket.com.
This
report
should
also
be
read
in
conjunction
with
Monthly
Operating
Reports
(“MORs”)
and
other
reports
filed
with
the
SEC
and
the
Court.
These
reports
can
also
be
located
at
www.lehman-
docket.com.
January 13, 2011
Lehman Brothers Holdings Inc. |
 2
Key Questions Surrounding the Plan
I.
What is the size and composition of the asset pie?
II.
What does the claims picture look like?
III.
How do you propose for the asset pie to be allocated?
IV.
Any key remaining challenges once the Plan gains consensus?
|
 3
I.
What is the Size and Composition of the Asset Pie?
($ in billions)
6/30/10
(4)
12/31/10
Cash
21.1
$
24.0
$
Financial Assets
(1)
38.2
37.1
Projected Reinvestment
(1.8)
(1.0)
Estimated Net Recovery
(3)
57.5
$
60.1
$
Notes:
(1)
(3)
(4)
Estimate of gross proceeds on future asset dispositions and foreign
receivables No litigation recovery included, and excludes future cost of
operations As presented at the September 22, 2010 State of the Estate
(2)
(2)
Excludes cash disbursements of approximately $600 million related to the Bank
Settlements in November 2010 |
 A.
What
is
the
Status
of
Further
Asset
Liquidations?
Market for sale or refinancing continues to improve
•
Commercial / multi-family cap rates approaching mid-2008 levels
•
M&A activity and refinancing has picked up
Opportunity cost much more attractive today than in the past
•
Bankruptcy reinvestment rate on cash of less than 50 bps is unattractive
Expect more opportunistic disposition activity over next 12 months, particularly in
the area of strategic real estate assets
4
I.
What is the Size and Composition of the Asset Pie?
(cont’d) |
 B.
What
Resources
are
Employed?
5
I.
What is the Size and Composition of the Asset Pie?
(cont’d)
Asset Management Resources (FTEs)
Actual
Actual
Proj.
Proj.
12/31/09
12/31/10
3/31/11
6/30/11
Lehman
215
219
207
206
A&M
39
33
24
17
Total
254
252
231
223 |
 6
II.
What Does the Claims Picture Look Like?
($ in billions)
April 14, 2010
September 22, 2010
Adjusted
Likely
Adjusted
Likely
Adjusted
Likely
Claims
Outstanding
Allowed
Outstanding
Allowed
Outstanding
Allowed
LBHI:
As Filed
Claims
Claims
Claims
Claims
Claims
Claims
Direct Claims
$210
$183
$102
$112
$112
$111
$111
Intercompany Claims
80
56
43
59
43
53
52
Third-Party Guarantee Claims:
Domestic Primary Obligor
48
21
46
22
30
30
International Primary Obligor
95
73
72
66
67
67
Total Third-Party Guarantee Claims
255
143
94
118
88
97
97
Affiliate Guarantee Claims:
Domestic Primary Obligor
23
8
6
International Primary Obligor
201
66
52
Total Affiliate Guarantee Claims
315
224
21
74
21
58
12
Total Claims Against LBHI
860
605
260
363
264
319
272
Total Claims Against All Other Debtors
302
135
135
101
101
50
50
Total Claims*
$1,162
$740
$395
$464
$365
$369
$322
*Epiq
claims currently at $775 billion.
December 31, 2010 |
 7
A. What
Resources
are
Employed?
II.
What Does the Claims Picture Look Like? (cont’d) Claims and
General Administrative Resources (FTEs) A&M
Lehman
A&M
Lehman
A&M
Lehman
A&M
Lehman
Claims Management
23
158
27
146
22
126
19
120
Finance, Tax and IT
43
119
24
121
19
132
16
132
Admin & Risk Management
3
31
3
28
1
31
1
31
Legal / Litigation Support
16
17
16
19
8
19
7
19
Total Headcount
85
325
70
314
50
308
43
302
12/31/09
12/31/10
3/31/11
6/30/11
Actual
Actual
Proj.
Proj. |
 8
III.
How do You Propose for the Asset Pie to be Allocated?
A.
Recap
of
the
9/22/10
State
of
the
Estate
Priorities announced at the State of the Estate:
•
Continued focus on claims assessment
•
Continued focus on foreign affiliates to obtain Plan support
•
Engage domestic creditor constituents |
 9
B.
Foreign
Affiliates
Substantial progress has been made:
•
Two additional Global Protocol meetings bringing total to seven group meetings
dedicated to the LBHI Plan
•
Exchange of proposals for terms of settlement agreements to be executed by
foreign affiliates
Bilateral negotiations have progressed
III. How do You Propose for the Asset Pie to be Allocated?
(cont’d) |
 10
C.
Domestic Affiliates
Primary focus since 9/22/10 has been to work with the Unsecured Creditors Committee
to develop a common approach to a compromise plan that is thoughtful and
fair to all stakeholders
Additionally, as a result of numerous and exhaustive meetings, received input from
major creditors and their advisors as to Plan concepts
•
On
December
15,
2010,
LBHI
Ad-hoc
group
filed
a
proposed
chapter
11
plan
based
upon substantive consolidation
•
Other creditor groups have provided settlement frameworks providing for
non- consolidation plans
•
In developing the proposed Plan, the Debtors have taken into account input from
the major constituents, including LBHI, LCPI, LBCS, and LBSF creditor
groups and the Unsecured Creditors’
Committee
Communications with LBI over issues has improved, but progressing slowly
Based
upon
input
received
from
major
constituencies,
the
Debtors
understand
the
legal and economic positions of such constituencies
III. How do You Propose for the Asset Pie to be Allocated?
(cont’d) |
 11
D.
Overview
of
Proposed
First
Amended
Plan
The Plan will encompass an economic compromise of creditor claims and provides for
a two step framework:
–
Creditors of certain of the subsidiary Debtors will have a percentage of their
recoveries reallocated to the LBHI Senior Unsecured and General Unsecured
creditors
–
Creditors of the subsidiary Debtors with guarantee claims against LBHI will have a
percentage of their recoveries reallocated to the LBHI Senior Unsecured and
General Unsecured creditors
–
Non
trading
intercompany
claims
of
LBHI
against
subsidiary
Debtors
will
be
reduced
by a certain percentage
III. How do You Propose for the Asset Pie to be Allocated?
(cont’d)
•
Settlement compromise between the Senior and General Unsecured
Creditors of LBHI and the creditors of subsidiary Debtors
|
 12
D.
Overview
of
Proposed
First
Amended
Plan
(cont’d)
–
Creditors of foreign affiliates with a guarantee claim against LBHI will have a
percentage of their recoveries reallocated to the LBHI Senior Unsecured and
General Unsecured creditors
–
Foreign
Affiliate
Guarantee
Claims
against
LBHI
will
be
reduced
depending
on
the
type of guarantee claim
III. How do You Propose for the Asset Pie to be Allocated?
(cont’d)
•
Settlement compromise between the Debtors and the Foreign Affiliates
|
 13
E.
Conclusion
Since March 2010 the Debtors have refined:
•
the fact base and legal analysis as to the enforceability of various guarantee
claims
•
their understanding of the positions taken by the numerous Lehman
constituents •
their
estimate
of
the
overall
claims,
especially
foreign
guarantee
claims
The Plan proposes that every creditor constituency agree to provide concessions
to obviate extended litigation, expense and loss of time
The
proposed
concessions
will
result
in
a
fair
resolution
of
all
issues
All parties should recognize that a lack of flexibility may be detrimental to
their economic interests
III. How do You Propose for the Asset Pie to be Allocated?
(cont’d) |
 14
F. Timetable -
Next Steps
Amended Plan and Amended Disclosure Statement should be filed within days
Debtors will review and discuss the Amended Plan with the key constituents
in the days and weeks following the filing
Prosecution
of
the
Amended
Plan
will
be
dependent
on
Plan
support
and
the
Court’s
calendar
III. How do You Propose for the Asset Pie to be Allocated?
(cont’d) |
 15
A significant amount of filed claims remains unresolved
LBSF and the other estates with derivative assets have made significant progress on
the asset (or receivable) collection process
The key challenge is to find a fair and cost effective way to resolve derivative
claim disputes
Proposed solution = Derivatives Settlement Framework
IV. Any Key Remaining Challenges, Once the Plan Gains Consensus?
|
 16
IV.
Key Remaining Challenge
(cont’d)
Future claims resolution more challenging as a result of (i) difficult legal and
valuation issues; and (ii) larger trade populations remaining (i.e.,
Big Banks) Two options:
(i)
Continue
claims
resolution
on
a
contract
by
contract
basis
using
limited
tools
available
(ADR)
to
avoid drawn-out costly litigation
(ii)
Resolve valuations for all derivative claims concurrently and uniformly through a
Derivative Settlement Framework to be proposed in the Plan
Note: (1) Derivative claims are claims prior to adjustments for management
estimates. Derivatives Claims Update
($ in millions)
Claims
Contracts
Trades
Derivative Claims (1)
$45,311
2,961
961,436
Settled
$5,040
1,561
69,684
Remaining
$40,271
1,400
891,752
Big Banks (share % of claims)
48%
5%
85% |
 17
IV.
Key Remaining Challenge
(cont’d)
The Derivatives Claims Settlement Framework concept was developed in collaboration
with certain of the Big Banks and the UCC
The Derivative Claims Settlement Framework provides for:
Derivative Claims Settlement Rules
–
At mid-market price
–
Using defined portfolio aggregation rules
–
Applying an allowance for bid / ask as determined by Debtor
•
Derivative claims settlement rules
•
A commitment to creditors to a process and timeline
•
The proposed framework provides consistent, transparent, derivative valuation
rules applicable to all remaining derivative contracts
•
Remaining Derivative contracts valued by Debtor:
•
At end of day at Termination Date, unless counterparty can satisfactorily prove
to Debtor on economic close out at a different time on the Termination
Date |
 18
IV.
Key Remaining Challenge
(cont’d)
Exceptions to the Rules
•
Commercially reasonable replacement of trade at Termination Date
•
Commercially reasonable Market Quotation Process (1992 ISDA) at Termination
Date |
 19
IV.
Key Remaining Challenge
(cont’d)
Process and Timeline
•
Claims
valuation
rules
to
be
developed
in
collaboration
with
the
UCC
with
feedback
from key market participants (certain Big Banks)
•
Framework to be applied to all unsettled derivative claims through the Plan with
the creation of separate derivative creditor claims class for each of the
derivative entities (LBSF, LBCS, LBCC, etc.)
•
Commitment to a timeline that will provide rules and result of rules by April 30,
2011 |
 20
IV.
Key Remaining Challenge
(cont’d)
Key Benefits of Settlement Framework
•
Uniformity –
Consistent rules to apply to valuation of all derivative claims
•
Transparency –
Rules will be published and claims valuations can be reviewed
•
Expediency –
Avoid years of litigation
•
Consensual Approach –
Rules developed in collaboration with UCC with feedback from
key market players
Settlement Framework will require a compromise by many of the derivative
claimants, but the claimants should recognize that the benefits outweigh the
compromise required |