Lehman Brothers Holdings has reportedly won bankruptcy court approval to restructure its investment in apartment complex owner Archstone Smith, which it acquired with Tishman Speyer for $22 billion in a 2007 take-private.
The restructuring will reduce Archstone’s debt load by $5.2 billion, according to court documents, improving the financial health of the apartment owner – which controls 80,000 residential units in US and Europe – and helping Lehman and Tishman avoid investing additional equity to cover debt payments.
The current restructuring plan is being viewed as more comprehensive than one completed last March, according to Bloomberg. In 2009, Lehman, together with Barclays Capital and Bank of America, restructured $485 million of Archstone debt to “preserve the value of their debt and equity investments” in the apartment company, according to court documents seen by PERE. Bank of America and Barclays had intended to resell their equity investments to other investors, the court papers added.
Lehman, Barclays, Bank of America financed roughly $4.8 billion of the original debt used to buy Archstone, $2.4 billion of which came from Lehman itself. Also as part of the restructuring deal, the maturity dates of some of Archstone’s loans will be extended, which could reduce interest repayments by $150 million a year, the court documents said.
Lehman said in court papers it now holds a 47 percent of the controlling common equity interests in Archstone, with Barclays and Bank of America also owning 47 percent.
Archstone had interests in more than 200 apartment complexes in the US and more than 230 in Europe as of 31 March, and prior to its 2007 take-private was the second largest publicly-traded multifamily REIT in the US.