There now seems to be a consensus that the collapse of Lehman Brothers last fall was the watershed moment of the Great Recession. What exactly happened and why will be a hot button topic in some circles for many years to come. Books and websites will argue the the government should/shouldn’t/couldn’t have saved it. In a decade or so some professor of economic history will probably write a book about how it wasn’t that important an event after all. And inevitably some cranks will come up with a conspiracy theory linking the whole thing to the Chinese government or orbital mind control lasers.
That’s all in the future. In the here and now the big arguments about the Lehman failure are over the pathetically small morsels of flesh still left on the carcass. In as much as Lehman still exists, it exists as a small band of people with the grim task of liquidating what is left, trying to get the payout to Lehman’s remaining creditors increased to, say, two cents on the dollar from one cent.
Lehman expired owing $200 billion it couldn’t pay. Its brokerage business and real estate (a.k.a. the only big obvious bits worth anything) were sold in a hurry to Barclays a few days after the bankruptcy. Barclays paid $1.54 billion, which may sound like a big check to write under the circumstances, but amongst the assets they got $4 billion in securities and cash. It was thought at the time that along with the assets went matching liabilities, including equipment leases, money owed employees, etc.
Funny thing, though, Barclays booked a $3.75 billion gain on the the purchase. Lehman has asked the bankruptcy court to reexamine the deal. Barclays has responded, and I am paraphrasing the legalese here, “Tough titties.”
The Lehman team did manage to renegotiate their office leases, reducing what they will have to pay from $326 million to $21 million. (Bankruptcy brings a certain amount of leverage.) Presumably, this was done mostly by agreeing to end leases on deserted office space right now and allowing the landlord to start looking for new tenants. Lehman also had to throw in the office furniture and fixtures.
The problem with that being that Barclays claims to own the office furniture and fixtures. Without really conceding that they do, Lehman has asked the bankruptcy court for permission to pay Barclays $5.9 million to buy back the furniture so it can get out of its leases. The court is set to hold a hearing on both revisiting the Barclays purchase terms and approving the furniture sale next week.
The court is likely to rule that Barclays owns the furniture in question because last month it issued a ruling that Barclays could keep 150 used chairs it took from a Lehman office for its own use. No doubt when Bankruptcy Judge James Peck was assigned the largest bankruptcy in US history he expected to be asked to resolve exactly this sort of dispute.
If you are asking yourself what 150 used office chairs in Manhattan could possibly be worth, you may be relieved to hear that Lehman and Barclays managed to negotiate another dispute over who owns what without the court’s help. In March Barclays returned what Bloomberg called “thousands of Lehman-logoed knickknacks”.
Items in storage include: 1,630 green canvas duffle bags with Lehman ribbon, 353 green compact golf umbrellas, 75 Waterford Marquis Treviso crystal clocks, 682 white Lehman coffee mugs, 130 Swiss Army pens, an English beechwood-lined sterling silver box from 1902, 200 Lehman conference pens, 12 pairs of Links of London cufflinks, 24 Screwpull wine openers inscribed “LB,’ 24 Titleist PRO VI golf balls inscribed “LB,” 30 girl Teddy Bears, 18 large, ivory womens’ F&G stretch snap shirts and one Tiffany shooting star.
As part of the agreement, Lehman paid Barclays $33,880 for “warehouse costs” and agreed, somewhat bizarrely, not to try and sell the stuff to Barclays employees. That’s okay. eBay will do.
[Photo: David Shankbone]