LEHMAN BROTHERS HOLDINGS INC. PLAN TRUST - FORM 8-K - EX-99.2 - LEHMAN BROTHERS HOLDINGS INC. - MONTHLY OPERATING REPORT - April 28, 2011

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Exhibit 99.2                                    

UNITED STATES BANKRUPTCY COURT

SOUTHERN DISTRICT OF NEW YORK

 

In re:

    

Chapter 11 Case No.

Lehman Brothers Holdings Inc., et al.,    

08-13555

   

Debtors.

    

MONTHLY OPERATING REPORT

MARCH 2011

SCHEDULE OF CASH RECEIPTS AND DISBURSEMENTS

SCHEDULE OF PROFESSIONAL FEE AND EXPENSE DISBURSEMENTS

SCHEDULE OF HEDGING TRANSACTIONS

 

DEBTORS’ ADDRESS:

    LEHMAN BROTHERS HOLDINGS INC.
   c/o WILLIAM J. FOX
   1271 AVENUE OF THE AMERICAS
   35th FLOOR
   NEW YORK, NY 10020

DEBTORS’ ATTORNEYS:

    WEIL, GOTSHAL & MANGES LLP
   c/o HARVEY R. MILLER
   767 FIFTH AVENUE
   NEW YORK, NY 10153

REPORT PREPARER:

    LEHMAN BROTHERS HOLDINGS INC., A DEBTOR IN POSSESSION (IN THE SOUTHERN DISTRICT OF NEW YORK)

THIS OPERATING STATEMENT MUST BE SIGNED BY A REPRESENTATIVE OF THE DEBTOR

The undersigned, having reviewed the attached report and being familiar with the Debtors’ financial affairs, verifies under penalty of perjury, that the information contained therein is complete, accurate and truthful to the best of my knowledge.

 

    Lehman Brothers Holdings Inc.

Date: April 27, 2011

  

By:

  

/s/ William J. Fox

    William J. Fox
    Executive Vice President

Indicate if this is an amended statement by checking here:        AMENDED STATEMENT  ¨

TABLE OF CONTENTS

 

Schedule of Debtors

      3   

Lehman Brothers Holdings Inc. (“LBHI”) and Other Debtors and Other Controlled Subsidiaries

   

Basis of Presentation — Schedule of Cash Receipts and Disbursements

      4   

Schedule of Cash Receipts and Disbursements

      5   

LBHI

   

Basis of Presentation – Schedule of Professional Fee and Expense Disbursements

      9   

Schedule of Professional Fee and Expense Disbursements

      10   

LBHI

   

Quarterly Hedging Transactions Update

      11   

Schedule of Hedging Transactions as of March 31, 2011

      13   

 

2

SCHEDULE OF DEBTORS

The following entities have filed for bankruptcy in the Southern District of New York:

 

         Case No.              Date Filed      

Lead Debtor:

      

Lehman Brothers Holdings Inc. (“LBHI”)

      08-13555         9/15/2008   

Related Debtors:

      

LB 745 LLC

      08-13600         9/16/2008   

PAMI Statler Arms LLC(1)

      08-13664         9/23/2008   

Lehman Brothers Commodity Services Inc. (“LBCS”)

      08-13885         10/3/2008   

Lehman Brothers Special Financing Inc. (“LBSF”)

      08-13888         10/3/2008   

Lehman Brothers OTC Derivatives Inc. (“LOTC”)

      08-13893         10/3/2008   

Lehman Brothers Derivative Products Inc. (“LBDP”)

      08-13899         10/5/2008   

Lehman Commercial Paper Inc. (“LCPI”)

      08 13900         10/5/2008   

Lehman Brothers Commercial Corporation (“LBCC”)

      08-13901         10/5/2008   

Lehman Brothers Financial Products Inc. (“LBFP”)

      08-13902         10/5/2008   

Lehman Scottish Finance L.P.

      08-13904         10/5/2008   

CES Aviation LLC

      08-13905         10/5/2008   

CES Aviation V LLC

      08-13906         10/5/2008   

CES Aviation IX LLC

      08-13907         10/5/2008   

East Dover Limited

      08 13908         10/5/2008   

Luxembourg Residential Properties Loan Finance S.a.r.l

      09-10108         1/7/2009   

BNC Mortgage LLC

      09-10137         1/9/2009   

LB Rose Ranch LLC

      09-10560         2/9/2009   

Structured Asset Securities Corporation

      09-10558         2/9/2009   

LB 2080 Kalakaua Owners LLC

      09-12516         4/23/2009   

Merit LLC

      09-17331         12/14/2009   

LB Somerset LLC

      09-17503         12/22/2009   

LB Preferred Somerset LLC

      09-17505         12/22/2009   

 

 

(1) On May 26, 2009, a motion was filed on behalf of Lehman Brothers Holdings Inc. seeking entry of an order pursuant to Section 1112(b) of the Bankruptcy Code to dismiss the Chapter 11 Case of PAMI Statler Arms LLC, with a hearing to be held on June 24, 2009. On June 19, 2009, the motion was adjourned without a date for a continuation hearing.

The Chapter 11 case of Lehman Brothers Finance SA (Case No: 08-13887) has been dismissed.

 

3

LEHMAN BROTHERS HOLDINGS INC. (“LBHI”) AND OTHER DEBTORS AND OTHER

CONTROLLED ENTITIES

BASIS OF PRESENTATION

SCHEDULE OF CASH RECEIPTS AND DISBURSEMENTS

MARCH 1, 2011 TO MARCH 31, 2011

The information and data included in this Monthly Operating Report (“MOR”) are derived from sources available to Lehman Brothers Holdings Inc. (“LBHI”) and its Controlled Entities (collectively, the “Company”). The term “Controlled Entities” refers to those entities that are directly or indirectly controlled by LBHI, including LAMCO LLC (“LAMCO”), and excludes, among other things, those entities that are under separate administrations in the United States or abroad, including Lehman Brothers Inc., which is the subject of proceedings under the Securities Investor Protection Act. LBHI and certain of its Controlled Entities have filed for protection under Chapter 11 of the Bankruptcy Code, and those entities are referred to herein as the “Debtors”. The Debtors’ Chapter 11 cases have been consolidated for procedural purposes only and are being jointly administered pursuant to Rule 1015(b) of the Federal Rules of Bankruptcy Procedure. The Debtors have prepared this MOR, as required by the Office of the United States Trustee, based on the information available to the Debtors at this time, but note that such information may be incomplete and may be materially deficient in certain respects. This MOR is not meant to be relied upon as a complete description of the Debtors, their business, condition (financial or otherwise), results of operations, prospects, assets or liabilities. The Debtors reserve all rights to revise this report.

 

  1.

This MOR is not prepared in accordance with U.S. generally accepted accounting principles (GAAP). This MOR should be read in conjunction with the financial statements and accompanying notes in the Company’s reports that were filed with the United States Securities and Exchange Commission.

 

  2.

This MOR is not audited and will not be subject to audit or review by the Company’s external auditors at any time in the future.

 

  3.

The beginning and ending balances include cash in demand-deposit accounts (DDA), money-market funds (MMF), treasury bills, and other investments.

 

  4.

Beginning and ending cash balances are based on preliminary closing numbers and are subject to adjustment.

 

  5.

Beginning and ending cash and investment balances exclude the following:

 

  •  

Cash posted as collateral for hedging activity;

  •  

Cash related to LBHI’s wholly-owned indirect subsidiaries Aurora Bank FSB, Woodlands Commercial Bank, Lehman Brothers Bancorp Inc., LBTC Transfer Inc. (formerly known as Lehman Brothers Trust Company N.A.) and Lehman Brothers Trust Company of Delaware;

  •  

Cash pledged on or prior to September 15, 2008 by the Company in connection with certain documents executed by the Company and Citigroup Inc. and HSBC Bank PLC, currently recorded at $2 billion and $230 million; and

  •  

$500 million which was seized by Bank of America (“BOA”) to offset derivatives claims against the Debtors. On November 16, 2010, the Bankruptcy Court ruled that BOA had no right to set-off these funds and must return the $500 million plus an estimated $95 million in interest to the Company.

 

  6.

Intercompany transfers between Lehman entities are listed as disbursements for the paying entity and receipts for the receiving entity.

 

4

LEHMAN BROTHERS HOLDINGS INC. and Other Debtors and Other Controlled Entities

Summary Schedule of Cash Receipts and Disbursements (a)

March 1, 2011 - March 31, 2011

Unaudited ($ in millions, foreign currencies reflected in USD equivalents)

 

 

          Debtor Entities         Other Controlled Entities (b)     Total Debtors
and Other
Controlled
Entities		  
          LBHI     LBSF     LCPI     Other     Total         LAMCO     LB1 Grp     PAMI     Other     Total    
Beginning Total Cash and Investments (3/1/11)     (c)      $         2,316      $         8,890      $         4,486      $         3,314      $         19,007        $         18      $         1,112      $ 1      $         2,481      $         3,612      $         22,619   

Restricted Cash

     (d)        (1,373)        (662)        (1,761)        (51)        (3,846)          -        -        -        (83)        (83)        (3,929)   
                                                                                           

Beginning Free Cash and Investments

       943        8,229        2,726        3,264        15,161          18        1,112        1        2,398        3,529        18,690   
                                                                                           

Sources of Cash

                          

Derivatives

       -        39        -        33        72          -        -        -        -        -        72   

Loans

       52        -        148        -        200          -        -        -        -        -        200   
Private Equity / Principal Investing        123        -        10        -        133          -        6        1        2        9        142   

Real Estate

       187        -        154        -        341          -        -        11        10        21        362   

Other

       33        121        35        2        191          39        1        -        9        48        240   

Asia

       -        -        -        -        -          -        -        -        28        28        28   
Inter-Company Transfers       34        12        39        -        85          -        -        -        12        12        97   
                                                                                           

Total Sources of Cash

       429        173        386        35        1,023          39        7        12        61        119        1,142   
                                                                                           

Uses of Cash

                          
Non-Operating (Principally Preservation of Assets)                           

Derivatives

       -        (44)        -        -        (44)          -        -        -        -        -        (44)   

Loans

       -        -        (111)        -        (111)          -        -        -        -        -        (111)   

Private Equity / Principal Investing

  

     -        -        (1)        -        (1)          -        (11)        -        -        (11)        (12)   

Real Estate

       (24)        -        (15)        -        (39)          -        -        (2)        (2)        (4)        (43)   

Other

       (11)        (63)        (39)        (2)        (115)          -        (1)        -        (2)        (3)        (118)   

Operating

       (82)        (4)        -        -        (86)          (11)        -        (1)        (2)        (14)        (100)   

Asia

       -        -        -        -        -          -        -        -        (5)        (5)        (5)   
Inter-Company Transfers       (30)        (1)        (6)        -        (37)          -        (11)        (10)        (39)        (60)        (97)   
                                                                                           

Total Uses of Cash

       (147)        (112)        (172)        (2)        (433)          (11)        (23)            (12)        (50)        (97)        (530)   
                                                                                           

Net Cash Flow

       282        61        214        33        590          28        (16)        -        10        22        612   

FX Fluctuation

     (s)        -        -        1        -        1          -        -        -        3        3        4   
                                                                                           
Ending Total Cash and Investments        2,598        8,951        4,702        3,347        19,598          46        1,096        1        2,495        3,638        23,236   

Restricted Cash

       (1,473)        (667)        (1,815)        (51)        (4,006)          -        -        -        (82)        (82)        (4,088)   
                                                                                           
Ending Free Cash and Investments (3/31/11)     (c)      $ 1,125      $ 8,284      $ 2,887      $ 3,296      $ 15,591        $ 46      $ 1,096      $ 1      $ 2,413      $ 3,556      $ 19,148   
                                                                                           

Totals may not foot due to rounding

 

5

LEHMAN BROTHERS HOLDINGS INC. and Other Debtors and Other Controlled Entities

Schedule of Cash Receipts and Disbursements (a)

March 1, 2011 - March 31, 2011

Unaudited ($ in millions, foreign currencies reflected in USD equivalents)

 

          Debtor Entities          Other Controlled Entities (b)     Total Debtors
and Other
Controlled
Entities		  
          LBHI     LBSF     LCPI     Other     Total         LAMCO     LB1 Grp     PAMI     Other     Total    
Beginning Total Cash and Investments (3/1/11)     (c)      $ 2,316      $ 8,890      $ 4,486      $ 3,314      $ 19,007        $ 18      $ 1,112      $ 1      $ 2,481      $ 3,612      $ 22,619   

Restricted Cash

     (d)        (1,373)        (662)        (1,761)        (51)        (3,846)          -        -        -        (83)        (83)        (3,929)   
                                                                                           
Beginning Free Cash and Investments       943        8,229        2,726        3,264        15,161          18        1,112        1        2,398        3,529        18,690   
                                                                                           

Sources of Cash

                          

Derivatives

                          

Collections from Live / Terminated Trades

     (e)        -        39        -        33        72          -        -        -        -        -        72   

Loans

                          

Agency Receipts

     (f)        -        -        68        -        68          -        -        -        -        -        68   

Principal

       49        -        69        -        118          -        -        -        -        -        118   

Interest

       3        -        11        -        14          -        -        -        -        -        14   
Private Equity / Principal Investing                          

Principal

     (g)        122        -        10        -        132          -        6        1        2        9        141   

Interest

       1        -        -        -        1          -        -        -        -        -        1   

Real Estate

                          

Principal

     (h)        185        -        146        -        331          -        -        11        9        20        351   

Interest

       2        -        8        -        10          -        -        -        1        1        11   

Other

                          

LAMCO Management Fees

     (i)        -        -        -        -        -          39        -        -        -        39        39   

Interest

     (j)        1        4        4        2        11          -        1        -        1        1        13   

Return of Hedging Collateral

     (k)        4        107        24        -        135          -        -        -        -        -        135   

Other

       28        10        7        -        45          -        -        -        8        8        53   

Asia

       -        -        -        -        -          -        -        -        28        28        28   
Inter-Company Transfers       34        12        39        -        85          -        -        -        12        12        97   
                                                                                           

Total Sources of Cash

       429        173        386        35        1,023          39        7        12        61        119        1,142   
                                                                                           

 

6

LEHMAN BROTHERS HOLDINGS INC. and Other Debtors and Other Controlled Entities

Schedule of Cash Receipts and Disbursements (a)

March 1, 2011 - March 31, 2011

Unaudited ($ in millions, foreign currencies reflected in USD equivalents)

 

          Debtor Entities                Other Controlled Entities (b)     Total Debtors
and Other
Controlled
Entities		  
          LBHI     LBSF     LCPI     Other     Total         LAMCO     LB1 Grp      PAMI     Other     Total    

Uses of Cash

                           
Non-Operating (Principally Preservation of Assets)                           

Derivatives

                           

Payments on Live Trades

       -        (44)        -        -        (44)          -        -         -        -        -        (44)   

Loans

                           

Agency Disbursements

     (f)        -        -        (67)        -        (67)          -        -         -        -        -        (67)   

Preservation of Assets

     (l)        -        -        (11)        -        (11)          -        -         -        -        -        (11)   

Other

     (m)        -        -        (33)        -        (33)          -        -         -        -        -        (33)   

Private Equity / Principal Investing

                           

Capital Calls

     (n)        -        -        (1)        -        (1)          -        (11)         -        -        (11)        (12)   

Real Estate

                           

Preservation of Assets

       (24)        -        (15)        -        (39)          -        -         (2)        (2)        (4)        (43)   

Other

                           

Hedging Collateral

     (o)        (1)        (57)        (35)        (2)        (95)          -        -         -        (1)        (1)        (96)   

Other

       (10)        (6)        (4)        -        (20)          -        (1)         -        (1)        (2)        (22)   

Operating

                           

Compensation and Benefits

     (p)        (14)        -        -        -        (14)          (7)        -         -        (1)        (8)        (22)   

Professional Fees

     (q)        (25)        -        -        -        (25)          (1)        -         -        -        (1)        (26)   

LAMCO Management Fees

     (i)        (39)        -        -        -        (39)          -        -         -        -        -        (39)   

Other

     (r)        (4)        (4)        -        -        (8)          (3)        -         (1)        (1)        (5)        (13)   

Asia

       -        -        -        -        -          -        -         -        (5)        (5)        (5)   

Inter-Company Transfers

       (30)        (1)        (6)        -        (37)          -        (11)         (10)        (39)        (60)        (97)   
                                                                                            

Total Uses of Cash

       (147)        (112)        (172)        (2)        (433)          (11)        (23)         (12)        (50)        (97)        (530)   
                                                                                            

Net Cash Flow

       282        61        214        33        590          28        (16)         -        10        23        612   

FX Fluctuation

     (s)        -        -        1        -        1          -        -         -        3        3        4   
                                                                                            
Ending Total Cash and Investments       2,598        8,951        4,702        3,347        19,598          46        1,096         1        2,495        3,638        23,236   

Restricted Cash

       (1,473)        (667)        (1,815)        (51)        (4,006)          -        -         -        (82)        (82)        (4,088)   
                                                                                            
Ending Free Cash and Investments (3/31/11)     $         1,125      $         8,284      $         2,887      $         3,296      $         15,591        $         46      $         1,096       $         1      $         2,413      $         3,556      $         19,148   
                                                                                            

Totals may not foot due to rounding

 

7

LEHMAN BROTHERS HOLDINGS INC. and Other Debtors and Other Controlled Entities

Schedule of Cash Receipts and Disbursements (a)

March 1, 2011 - March 31, 2011

Unaudited ($ in millions, foreign currencies reflected in USD equivalents)

Notes:

(a) Includes cash receipts and disbursements for all Debtor Entities and Other Controlled Entities, globally. Activity in Derivatives, Loans, Private Equity / Principal Investing, Real Estate and Other reflects bank accounts that are managed and reconciled by Lehman’s U.S. and European operations. Activity in Asia and South America reflects bank accounts that are managed and reconciled by Lehman’s Asia and South American operations.

(b) Other Controlled Entities include Non-Debtor entities which are under the control of LBHI, except for Aurora Bank, Woodlands Commercial Bank, Lehman Brothers Bancorp Inc., LBTC Transfer Inc. (f/k/a Lehman Brothers Trust Company N.A.) and Lehman Brothers Trust Company of Delaware, which are not reflected in this schedule.

(c) Beginning and Ending Cash and Investment balances exclude cash posted for hedging activity.

(d) Restricted balances are preliminary estimates of cash in co-mingled or segregated accounts associated with pledged assets, court ordered segregated accounts, funds administratively held by banks and other identified funds which may not belong to the Debtors or Other Controlled Entities.

(e) Collections from Live / Terminated Trades for Other Debtors reflects the following: LBCC $31 million, LBCS $1 million and LBFP $1 million.

(f) Reflects the collection of principal and interest for syndicated loan participants and subsequent distribution to syndicated loan participants.

(g) Primarily reflects sale of a direct investment in Quadrant and a partial redemption of an LP Investment in Silver Lake Credit Fund.

(h) Primarily reflects principal received on sale of Heritage Fields and principal paydowns from the Archstone loan.

(i) Reflects payment for LAMCO services for Q1 2011.

(j) Reflects interest earned on court-approved investments portfolio. Interest for Other Debtors reflects the following: LOTC $1 million and LBDP $1 million.

(k) Reflects the return of cash posted to hedge foreign currency and interest rate risk for Derivatives, Loans and Real Estate.

(l) Reflects advances on revolving lines of credit.

(m) Primarily reflects principal and interest forwarded to syndicated loan participants.

(n) Primarily reflects capital calls for Private Equity LP stakes and Direct Investments.

(o) Reflects cash posted to hedge foreign currency and interest rate risk for Derivatives, Loans and Real Estate. Hedging collateral for Other Debtors reflects $2 million for LBFP.

(p) Compensation and Benefits includes fees paid to Alvarez & Marsal as interim management. A portion of the $14 million related to LBHI will be subject to future cost allocation to various Lehman legal entities.

(q) A portion of the $25 million related to LBHI will be subject to future cost allocation to various Lehman legal entities.

(r) Primarily reflects expenses related to occupancy, the Transition Services Agreement, taxes, insurance and infrastructure costs. A portion of the $4 million related to LBHI will be subject to future cost allocation to various Lehman legal entities.

(s) Reflects fluctuation in value of foreign currency bank accounts.

 

8

LEHMAN BROTHERS HOLDINGS INC. (“LBHI”) AND OTHER DEBTORS AND OTHER

CONTROLLED ENTITIES

BASIS OF PRESENTATION

SCHEDULE OF PROFESSIONAL FEE AND EXPENSE DISBURSEMENTS

DATED FROM FILING DATE TO MARCH 31, 2011

The information and data included in this Monthly Operating Report (“MOR”) are derived from sources available to Lehman Brothers Holdings Inc. (“LBHI”) and its Controlled Entities (collectively, the “Company”). The term “Controlled Entities” refers to those entities that are directly or indirectly controlled by LBHI, including LAMCO LLC (“LAMCO”), and excludes, among other things, those entities that are under separate administrations in the United States or abroad, including Lehman Brothers Inc., which is the subject of proceedings under the Securities Investor Protection Act. LBHI and certain of its Controlled Entities have filed for protection under Chapter 11 of the Bankruptcy Code, and those entities are referred to herein as the “Debtors”. The Debtors’ Chapter 11 cases have been consolidated for procedural purposes only and are being jointly administered pursuant to Rule 1015(b) of the Federal Rules of Bankruptcy Procedure. The Debtors have prepared this MOR, as required by the Office of the United States Trustee, based on the information available to the Debtors at this time, but note that such information may be incomplete and may be materially deficient in certain respects. This MOR is not meant to be relied upon as a complete description of the Debtors, their business, condition (financial or otherwise), results of operations, prospects, assets or liabilities. The Debtors reserve all rights to revise this report.

 

  1.

This MOR is not prepared in accordance with U.S. generally accepted accounting principles (GAAP). This MOR should be read in conjunction with the financial statements and accompanying notes in the Company’s reports that were filed with the United States Securities and Exchange Commission.

 

  2.

This MOR is not audited and will not be subject to audit or review by the Company’s external auditors at any time in the future.

 

  3.

The professional fee disbursements presented in this report reflect the date of actual cash payments to professional service providers. The Debtors have incurred additional professional fee expenses during the reporting period that will be reflected in future MORs as cash payments are made to providers.

 

9

LEHMAN BROTHERS HOLDINGS INC. and Other Debtors and Other Controlled Entities

Schedule of Professional Fee and Expense Disbursements (a)

March 2011

Unaudited ($ in thousands)

 

        March-2011         Filing Date
  Through March-2011   (b)		  

Debtors - Claims and Noticing Agent

      

Epiq Bankruptcy Solutions LLC

  

Claims Management and Noticing Agent

   $ 403        $ 12,711         

Debtors - Section 363 Professionals

      

Alvarez & Marsal LLC

  

Interim Management

     10,172          422,867         

Kelly Matthew Wright

  

Art Consultant and Auctioneer

     -              91         

Natixis Capital Markets Inc.

  

Derivatives Consultant

     -              14,297         

Debtors - Section 327 Professionals

      

Bingham McCutchen LLP

  

Special Counsel - Tax

     -              16,787         

Bortstein Legal LLC

  

Special Counsel - IT and Other Vendor Contracts

     37          3,753         

Clyde Click, P.C.

  

Special Counsel - Real Estate

     27          78         

Curtis, Mallet-Prevost, Colt & Mosle LLP

  

Special Counsel - Conflicts

     1,326          26,519         

Dechert LLP

  

Special Counsel - Real Estate

     165          1,698         

Deloitte LLP

  

Tax Services

     -              190         

Discover Ready LLC

  

eDiscovery Services

     867          12,812         

Ernst & Young LLP

  

Audit and Tax Services

     -              1,553         

Gibson Dunn & Crutcher LLP

  

Special Counsel - Real Estate

     232          2,037         

Hudson Global Resources

  

Contract Attorneys

     524          9,583         

Huron Consulting

  

Tax Services

     -              2,145         

Jones Day

  

Special Counsel - Asia and Domestic Litigation

     982          48,983         

Kasowitz, Benson, Torres & Friedman

  

Special Counsel - Litigation

     60          649         

Kleyr Grasso Associes

  

Special Counsel - UK

     -              454         

Latham & Watkins LLP

  

Special Counsel - Real Estate

     16          428         

Lazard Freres & Co.

  

Investment Banking Advisor

     -              24,900         

McKenna Long & Aldridge LLP

  

Special Counsel - Commercial Real Estate Lending

     -              4,935         

MMOR Consulting

  

Tax Services

     43          315         

Momo-o, Matsuo & Namba

  

Special Counsel - Asia

     -              137         

O’Neil Group

  

Tax Services

     107          1,377         

Pachulski Stang Ziehl & Jones

  

Special Counsel - Real Estate

     -              1,880         

Paul, Hastings, Janofsky & Walker LLP

  

Special Counsel - Real Estate

     52          1,070         

PricewaterhouseCoopers LLP

  

Tax Services

     368          1,226         

Reed Smith LLP

  

Special Counsel - Insurance

     62          470         

Reilly Pozner LLP

  

Special Counsel - Mortgage Litigation and Claims

     379          5,842         

Simpson Thacher & Bartlett LLP

  

Special Counsel - SEC Reporting, Asset Sales, and Congressional Testimony

     -              2,558         

SNR Denton LLP

  

Special Counsel - Real Estate

     80          802         

Sutherland LLP

  

Special Counsel - Tax

     -              286         

Weil Gotshal & Manges LLP

  

Lead Counsel

     6,096          285,974         

Windels Marx Lane & Mittendorf, LLP

  

Special Counsel - Real Estate

     224          2,437         

Wollmuth Maher & Deutsch LLP

  

Special Counsel - Derivatives

     -              582         

Creditors - Section 327 Professionals

      

FTI Consulting Inc.

  

Financial Advisor

     2,724          58,703         

Houlihan Lokey Howard & Zukin Capital Inc.

  

Investment Banking Advisor

     322          11,255         

Milbank Tweed Hadley & McCloy LLP

  

Lead Counsel

     3,349          93,235         

Quinn Emanuel Urquhart Oliver & Hedges LLP

  

Special Counsel - Conflicts

     1,874          17,116         

Richard Sheldon, Q.C.

  

Special Counsel - UK

     -              130         

Examiner - Section 327 Professionals

      

Duff & Phelps LLC

  

Financial Advisor

     -              42,502         

Jenner & Block LLP

  

Examiner

     7          57,958         

Fee Examiner

      

Feinberg Rozen LLP

  

Fee Examiner (Previous)

     -              3,158         

Brown Greer Plc

  

Fee and Expense Analyst

     -              539         
                 

Total Non-Ordinary Course Professionals

       30,499          1,197,025         
                 

Debtors - Ordinary Course Professionals

       1,424          37,556         
                 

US Trustee Quarterly Fees

       -              1,182         
                 

Total Professional Fees and UST Fees (c)

     $ 31,923        $ 1,235,763         
                 

 

(a) All professional fees have been paid by LBHI; however, a portion has been charged back to debtor and non-debtor subsidiaries based on the direct costs associated with each entity and an allocation methodology.
(b) The figures reflected in this table represent cash disbursements from LBHI’s filing date through the end of March 2011. The figures do not include accruals.
(c) Excludes professional services rendered on behalf of non-debtor entities which are invoiced separately.

 

10

LEHMAN BROTHERS HOLDINGS INC. (“LBHI”) AND OTHER DEBTORS AND OTHER

CONTROLLED ENTITIES

BASIS OF PRESENTATION

QUARTERLY HEDGING TRANSACTIONS UPDATE

AS OF MARCH 31, 2011

The information and data included in this report are derived from sources available to Lehman Brothers Holdings Inc. (“LBHI”) and its Controlled Entities (collectively, the “Company”). The term “Controlled Entities” refers to those entities that are directly or indirectly controlled by LBHI, and excludes, among other things, those entities that are under separate administrations in the United States or abroad, including Lehman Brothers Inc., which is the subject of proceedings under the Securities Investor Protection Act. LBHI and certain of its Controlled Entities have filed for protection under Chapter 11 of the Bankruptcy Code, and those entities are referred to herein as the “Debtors”. The Debtors’ Chapter 11 cases have been consolidated for procedural purposes only and are being jointly administered pursuant to Rule 1015(b) of the Federal Rules of Bankruptcy Procedure (the “Bankruptcy Rules”).

On March 11, 2009, the United States Bankruptcy Court for the Southern District of New York overseeing the Debtors’ Chapter 11 cases (the “Court”) entered an “Order Pursuant to Sections 105 and 364 of the Bankruptcy Code Authorizing the Debtors to Grant First Priority Liens in Cash Collateral Posted in Connection With the Hedging Transactions the Debtors Enter Into Through Certain Futures and Prime Brokerage Accounts” [Docket No. 3047] (the “Derivatives Hedging Order”).

On July 16, 2009 the Court entered a separate “Order Pursuant to Sections 105 and 364 of the Bankruptcy Code Authorizing the Debtors to Grant First Priority Liens in Collateral Posted in Connection With the Hedging Transactions” [Docket No. 4423] (the “Residential Loan Order”).

On January 14, 2010 the Court entered a separate “Order Granting LBHI’s Motion for Authorization, Pursuant to Sections 105, 363 and 364 of the Bankruptcy Code, to Sell Certain Asset Backed-Securities and Related Relief” [Docket No. 6659], which authorized the Company to enter into hedging transactions to hedge against loss of value from fluctuations in foreign exchange rates (the “Asset Backed-Securities Hedging Order”).

On November 18, 2010 the Court entered a separate “Order Pursuant to Sections 105 and 364 of the Bankruptcy Code Authorizing the Debtors to Grant First Priority Liens in Collateral Posted in Connection with Foreign Exchange Hedging Transactions” [Docket No. 12891] (the “Macro FX Hedging Order”).

Terms used and not otherwise defined herein shall have the meanings ascribed thereto in the Derivatives Hedging Order, the Residential Loan Order, the Asset Backed-Securities Hedging Order or the Macro FX Hedging Order, as the case may be.

The Debtors have prepared this Quarterly Hedging Transactions Update, as required by the Derivatives Hedging Order, the Residential Loan Order, the Asset Backed-Securities Hedging Order and the Macro FX Hedging Order, based on the information available to the Debtors at this time, but note that such information is partially based on market pricing which is subject to day-to-day fluctuations. The Debtors reserve all rights to revise this report.

Derivatives Hedging Order. Between the entry of the Derivatives Hedging Order and March 31, 2011 (the “Report Date”), the Debtors have executed 11 Hedging Transactions and the current liquidation value of collateral posted approximates $343 million. The Open Derivative Positions correspond to 39 non-terminated derivative contracts with an estimated recovery value of approximately $457 million as of the Report Date. The expected recovery amounts are determined using various models, data sources, and certain assumptions regarding contract provisions. The Company expects to adjust the amounts recorded for the Open Derivatives Positions in the future; such adjustments (including write-downs and write-offs) may be material. For further description regarding derivative recovery values, please refer to the June 2010 Supplemental Monthly Operating Report filed on January 24, 2011.

As of the Report Date, the Hedging Transactions were allocated to the individual Debtors as set forth on page 13.

 

11

Residential Loan Order. Between the entry of the Residential Loan Order and the Report Date, there were no Residential Hedging Transactions.

Asset Backed-Securities Hedging Order. Between the entry of the Asset Backed-Securities Hedging Order and the Report Date, the Debtors have executed 1 Hedging Transaction. The current liquidation value of the collateral posted approximates $5 million. The estimated recovery value of the Asset Backed-Securities portfolio as of the Report Date approximates $86 million. The expected recovery amounts for the underlying assets are subject to market fluctuations (obligor performance, interest rate environment, etc.) and are subject to change.

As of the Report Date, the Hedging Transactions were allocated to the individual Debtor set forth on the following page.

Macro FX Hedging Order. Between the entry of the Macro FX Hedging Order and the Report Date, the Debtors have proposed and executed 3 Hedging Transactions. The current liquidation value of the collateral posted approximates $79 million. The estimated recovery value of the underlying assets being hedged approximates $1.4 billion as of the Report Date. The expected recovery amounts for the underlying assets are subject to market fluctuations (obligor performance, interest rate environment, etc.) and are subject to change.

As of the Report Date, the Hedging Transactions were allocated to the individual Debtors as set forth on the following page.

 

12

Lehman Brothers Holdings Inc.

As of March 31, 2011

Quarterly Hedging Report

Derivatives Hedging Order

 

Current Liquidation Value Current Liquidation Value Current Liquidation Value
   

Debtor

    Current Liquidation Value
of Collateral Posted for
Hedging Transactions (a)		      Estimated Recovery
Value of Receivables
Being Hedged		  
 

Lehman Brothers Special Financing Inc. (“LBSF”)

    $ 330,762,429       $ 370,049,075   
 

Lehman Brothers Commercial Corp. (“LBCC”)

      3,823,540         72,956,727   
 

Lehman Brothers Financial Products Inc. (“LBFP”)

      8,815,188         13,522,389   
                   
 

Total

    $ 343,401,156       $ 456,528,191   
                   

 

Asset Backed-Securities Hedging Order

 

  

   

Debtor

    Current Liquidation Value
of Collateral Posted for
Hedging Transactions (a)		      Estimated Recovery
Value of Receivables
Being Hedged		  
 

Lehman Brothers Holdings Inc. (“LBHI”)

    $ 4,631,335       $ 86,302,495   
                   
 

Total

    $ 4,631,335       $ 86,302,495   
                   

 

Macro FX Hedging Order

 

  

   

Debtor

    Current Liquidation Value
of Collateral Posted for
Hedging Transactions (a)		      Estimated Recovery
Value of  Receivables
Being Hedged		  
 

Lehman Brothers Holdings Inc. (“LBHI”)

    $ 3,614,519       $ 66,887,657   
 

Lehman Commercial Paper Inc. (“LCPI”)

      74,946,872         1,362,851,213   
                   
 

Total

    $ 78,561,391       $ 1,429,738,870   
                   

 

(a) Value of collateral represents initial margin posted, net of any gains or losses on hedging transactions. Liquidation value excludes any subsequent variation margin posted or returned for LBHI and LCPI under the Asset Backed-Securities and Macro FX Hedging Orders.

    

 

13