Another Lehman Brothers collapse in less than a decade

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Two associates of Lehman Brothers, the US investment bank that collapsed in 2008 and fueled an economic meltdown, filed for Chapter 11 bankruptcy late on Thursday, a reminder of the complexity of unwinding a global financial institution.

The two affiliates, Lehman Brothers UK Holdings (Delaware) Inc. and Lehman Pass-Through Securities Inc., were put into bankruptcy as part of a deal that will generate 485 million dollars cash for the Lehman estate, according to court documents.

The affiliates own residential mortgage-backed securities, real estate and stock in First Data Corp, which helps process credit card transactions, among other assets, according to papers filed in the US bankruptcy court in Manhattan. Affiliates of Brookfield Asset Management Inc. of Canada are buying stakes in the Lehman affiliates, which were put into bankruptcy to carry out the deal.

A street sign for Wall Street hangs outside the New York Stock Exchange on September 16, 2013 in New York City. /VCG Photo

Administrators have spent years winding down Lehman’s holdings and have distributed around 147 billion dollars to creditors, according to court records.

More than 100 people still work for Lehman and the case remains one of the largest US bankruptcies, even after the distributions to creditors. The estate holds 7 billion dollars of assets, much of it cash, as it works through hundreds of remaining creditor claims and legal disputes.

Lehman is currently in the midst of a trial, already 42 days long, seeking 2 billion dollars from Citigroup Inc. over disputed derivative claims. Citigroup has denied it owes the money to Lehman.

The memory of Lehman’s dramatic failure has sparked regulatory efforts to prevent another damaging collapse. On Friday, the US Federal Reserve finalized a rule aimed at making it easier to wind down large banks.

Source(s): Reuters