Sunday, October 25, 2009

After Lehman Bankruptcy





Written by Minjune Kim


Simmons & Simmons has advised hedge fund RAB Market Cycles Fund on the latest dispute in the Lehman Brothers bankruptcy saga. Simmons acted for RAB in relation to the status of post-administration cash derived from securities received by the failed bank after it went into administration. As a result of the ruling handed down on 21st October. City hedge funds could now see the money returned to the beneficiaries rather than falling into the general estate. RAB successfully argued that the post-administration cash held by Lehman as custodian was held on trust, and therefore under Financial Services Authority regulations should not fall into Lehman's general estate. The ruling will be seen as important by so-called prime brokerage clients, which currently have cash worth $3.3bn (£2bn) tied up in the administration.


Hundreds of hedge funds that were customers of Lehman Brothers and had their assets frozen when the bank collapsed can keep the cash generated by their portfolios in the 13 months since the investment bank was declared bankrupt. A High Court judge said yesterday that about $3.3 billion (£2 billion) in dividend, interest and other payments accrued since Lehmans entered bankruptcy on September 15 last year should go directly to the funds, rather than into a general pot for all Lehmans creditors. The decision is a setback for Lehmans’ non-hedge fund creditors, which had hoped to benefit from the constantly expanding pot of cash generated by frozen hedge fund holdings. PricewaterhouseCoopers (PwC), the bank’s European administrator, had kept confidential the names of and amounts owed to Lehmans’ European creditors, for fear that financial institutions could suffer if it became known that they had large Lehmans-related losses.


ehman Brothers Holdings Inc, the bankrupt investment bank, paid its lawyers and financial advisers $402.9m between September 2008, when it failed, and now, according to a filing with the US Securities and Exchange Commission.In total, 23 law firms, financial advisers, investment banks and consulting firms were paid in fees and expense reimbursements over the last 12 months. Restructuring firm Alvarez & Marsal LLC, which provided Lehman with its current chief executive officer, Bryan Marsal, was paid $169.2m in fees. The firm said it had about 175 full-time employees working on the bankruptcy.Weil Gotshal & Manges LLP of New York, the investment bank’s lead bankruptcy-law firm, was paid $98.5m, Lehman said in the filing.




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