Lehman Brothers Holdings, the estate of the former Wall Street banking giant, has challenged the validity of Equity Residential's agreement to acquire a minority stake in Archstone. The challenge comes amid the news of Lehman receiving court approval for its bankruptcy exit plan ahead of schedule.
As part of the reorganisation plan, which a judge approved in US bankruptcy court in New York on Tuesday, Lehman will continue to manage its holdings in Archstone, the acquisition of which played a significant part in the firm’s collapse. Prior to the court hearing, however, Lehman filed a document with the US Securities and Exchange Commission challenging the validity of Equity Residential’s agreement to buy a 26.5 percent ownership interest in Archstone from Bank of America and Barclays for $1.33 billion.
Lehman, which owns 47 percent of the troubled Denver-based apartment REIT, said in its SEC filing that it considers the offer void partly because the banks and Equity Residential deliberately timed the deal shortly prior to Lehman’s hearing to optimise the chance that Lehman would not exercise its rights of first refusal to buy any Archstone interest.
In addition, Lehman contests Equity Residential’s offer because it “believes better alternatives exist for maximizing value”. Lehman also said it has not been provided with the information shared between Equity Residential and sellers Bank of America and Barclays. At press time, officials at Bank of America, Barclays and Equity Residential could not be reached for comment.
Lehman’s plan to emerge out of Chapter 11 protection, which US Bankruptcy Judge James Peck approved, calls for liquidating its remaining assets over the next three years to raise a total of $65 billion to pay out to creditors. The plan is backed by creditors holding about $450 billion in claims.
“This case has required compromise and common sense, diligence and determination, and the reconciliation of complex positions that at times seemed irreconcilable,” said Bryan Marsal, chief executive officer of Lehman Brothers Holdings and co-founder of Alvarez & Marsal, the professional services firm that has been managing Lehman's operations during bankruptcy. “Confirmation of this plan is a testament to the enormous efforts of the many stakeholders who recognized the value of an economic compromise plan and did yeoman's work to achieve it.”
According to documents filed with the courts, as of 31 October, Lehman and its affiliates had more than $23 billion of cash available after spending nearly $1.5 billion in fees for managers and advisers. Lehman will distribute some of the $23 billion to creditors in the first quarter of 2012, according to the firm’s estate.
Lehman, once the fourth largest investment bank in the world, filed for bankruptcy in September 2008 with $639 billion in assets and $613 billion in debt. Its collapse has resulted in more than 75 separate and distinct bankruptcy proceedings.