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8-K - 8-K - LEHMAN BROTHERS HOLDINGS INC. PLAN TRUST | d765494d8k.htm |
Exhibit 99.1
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
In re: | Chapter 11 Case No. | |
Lehman Brothers Holdings Inc., et al., | 08-13555 (JMP) Jointly Administered | |
Debtors. |
BALANCE SHEETS
AS OF MARCH 31, 2014
MANAGEMENTS DISCUSSION AND ANALYSIS
AND ACCOMPANYING SCHEDULES
DEBTORS ADDRESS: | LEHMAN BROTHERS HOLDINGS INC. c/o MICHAEL S. LETO CHIEF FINANCIAL OFFICER 1271 AVENUE OF THE AMERICAS 40th FLOOR NEW YORK, NY 10020 | |
DEBTORS ATTORNEYS: | WEIL, GOTSHAL & MANGES LLP c/o JACQUELINE MARCUS, GARRETT A. FAIL 767 FIFTH AVENUE NEW YORK, NY 10153 | |
REPORT PREPARER: | LEHMAN BROTHERS HOLDINGS INC., AS PLAN ADMINISTRATOR |
Date: July 30, 2014
TABLE OF CONTENTS
Schedule of Debtors |
3 | |||
Notes to the Balance Sheets |
4 | |||
Balance Sheets |
18 | |||
Managements Discussion and Analysis: |
21 | |||
1. Introductory Notes |
22 | |||
2. Highlights |
23 | |||
3. Investments and Expenditures |
26 | |||
4. Asset Sales, Restructurings and Other |
27 | |||
5. Claims Update |
29 | |||
6. Litigation Update |
31 | |||
7. Costs and Expenses |
33 | |||
8. Appendix A Glossary of Terms |
34 | |||
Accompanying Schedules: |
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Financial Instruments Summary and Activity |
35 | |||
Commercial Real Estate By Product Type |
36 | |||
Commercial Real Estate By Property Type and Region |
37 | |||
Loan Portfolio by Maturity Date and Residential Real Estate |
38 | |||
Private Equity / Principal Investments by Legal Entity and Product Type |
39 | |||
Derivatives Assets and Liabilities |
40 | |||
Unfunded Lending and Private Equity / Principal Investments Commitments |
41 |
SCHEDULE OF DEBTORS
The following entities (the Debtors) filed for bankruptcy in the United States Bankruptcy Court for Southern District of New York (the Bankruptcy Court) on the dates indicated below. On December 6, 2011, the Bankruptcy Court confirmed the Modified Third Amended Joint Chapter 11 Plan for Lehman Brothers Holdings Inc. and its Affiliated Debtors (the Plan). On March 6, 2012, the Effective Date (as defined in the Plan) occurred. The Debtors Chapter 11 cases remain open as of the date hereof.
Case No. | Date Filed | |||||||
Lehman Brothers Holdings Inc. (LBHI) |
08-13555 | 9/15/2008 | ||||||
LB 745 LLC |
08-13600 | 9/16/2008 | ||||||
PAMI Statler Arms LLC |
08-13664 | 9/23/2008 | ||||||
Lehman Brothers Commodity Services Inc. (LBCS) |
08-13885 | 10/3/2008 | ||||||
Lehman Brothers Special Financing Inc. (LBSF) |
08-13888 | 10/3/2008 | ||||||
Lehman Brothers OTC Derivatives Inc. (LOTC) |
08-13893 | 10/3/2008 | ||||||
Lehman Brothers Derivative Products Inc. (LBDP) |
08-13899 | 10/5/2008 | ||||||
Lehman Commercial Paper Inc. (LCPI) |
08-13900 | 10/5/2008 | ||||||
Lehman Brothers Commercial Corporation (LBCC) |
08-13901 | 10/5/2008 | ||||||
Lehman Brothers Financial Products Inc. (LBFP) |
08-13902 | 10/5/2008 | ||||||
Lehman Scottish Finance L.P. |
08-13904 | 10/5/2008 | ||||||
CES Aviation LLC |
08-13905 | 10/5/2008 | ||||||
CES Aviation V LLC |
08-13906 | 10/5/2008 | ||||||
CES Aviation IX LLC |
08-13907 | 10/5/2008 | ||||||
East Dover Limited |
08-13908 | 10/5/2008 | ||||||
Luxembourg Residential Properties Loan Finance S.a.r.l |
09-10108 | 1/7/2009 | ||||||
BNC Mortgage LLC (BNC) |
09-10137 | 1/9/2009 | ||||||
LB Rose Ranch LLC |
09-10560 | 2/9/2009 | ||||||
Structured Asset Securities Corporation |
09-10558 | 2/9/2009 | ||||||
LB 2080 Kalakaua Owners LLC |
09-12516 | 4/23/2009 | ||||||
Merit LLC (Merit) |
09-17331 | 12/14/2009 | ||||||
LB Somerset LLC |
09-17503 | 12/22/2009 | ||||||
LB Preferred Somerset LLC (LBPS) |
09-17505 | 12/22/2009 |
The Company has established an email address to receive questions from readers regarding this presentation. The Company plans to review questions received and for those subjects which the Company determines a response would not (i) violate a confidentiality provision, (ii) place the Company in a competitive or negotiation disadvantage, or (iii) be unduly burdensome, the Company shall endeavor to post a response (maintaining the anonymity of the question origination) on the Epiq website maintained for the Company: www.lehman-docket.com. The Company assumes no obligation to respond to e-mail inquiries. Please email questions in clear language with document references to QUESTIONS@lehmanholdings.com.
3
LEHMAN BROTHERS HOLDINGS INC. AND OTHER DEBTORS
AND DEBTOR-CONTROLLED ENTITIES
NOTES TO THE BALANCE SHEETS AS OF MARCH 31, 2014
(Unaudited)
Note 1 Basis of Presentation
The information and data included in the Balance Sheets, the Notes to the Balance Sheets, the Managements Discussion and Analysis and Accompanying Schedules (collectively, the Balance Sheets) are derived from sources available to the Debtors and Debtor-Controlled Entities (collectively, the Company). Debtors and Debtor-Controlled Entities refer to those entities that are directly or indirectly controlled by LBHI and exclude, among others, certain entities (such as Lehman Brothers Inc. (LBI), Lehman Brothers International (Europe) (in administration) (LBIE) and Lehman Brothers Japan (LBJ)) that were not managed or controlled by a Debtor as of the Effective Date and are under separate administrations in the U.S. or abroad, including proceedings under the Securities Investor Protection Act (collectively, Non-Controlled Affiliates). LBHI (on September 15, 2008) and certain Other Debtors (on various dates, each referred to as the respective Commencement Dates) filed for protection under Chapter 11 of the Bankruptcy Code and are referred to herein as Debtors. The Debtors Chapter 11 cases have been consolidated for procedural purposes only and are being jointly administered pursuant to Rule 1015(b) of the Federal Rules of Bankruptcy Procedure. Entities that have not filed for protection under Chapter 11 of the Bankruptcy Code are referred to herein as Debtor-Controlled Entities, although they may be a party to other proceedings, including among other things, foreign liquidations or other receiverships. The Company has prepared the Balance Sheets based on the information available to the Company at this time; however, such information may be incomplete and may be materially deficient. The Balance Sheets are not meant to be relied upon as a complete description of the Company, its business, condition (financial or otherwise), results of operations, prospects, assets or liabilities. The Company reserves all rights to revise this report.
The Balance Sheets should be read in conjunction with previously filed 2013+ Cash Flow Estimates, Form 8-K reports as filed with the United States Securities and Exchange Commission (SEC) and other filings including the Plan and related Disclosure Statement (the Disclosure Statement), dated August 31, 2011, made after the Commencement Dates as filed with various regulatory agencies or the Bankruptcy Court by LBHI, Other Debtors and Debtor-Controlled Entities. The 2013+ Cash Flow Estimates reflect the estimated realizable values which differ from the amounts recorded in the Balance Sheets and adjustments (including write-downs and write-offs) may be material and recorded in future Balance Sheets. The Balance Sheets are not prepared in accordance with U.S. Generally Accepted Accounting Principles (GAAP).
The Balance Sheets do not reflect normal period-end adjustments, including accruals, which were generally recorded by the Company prior to the filing of the Chapter 11 cases upon review of major accounts as of the end of each quarterly and annual accounting period. The Balance Sheets do not include explanatory footnotes and other disclosures required under GAAP and are not presented in a GAAP-based SEC reporting format. Certain classifications utilized in the Balance Sheets differ from prior report classifications; accordingly amounts may not be comparable. Certain items presented in the Balance Sheets remain under continuing review by the Company and may be accounted for differently in future Balance Sheets. Accordingly, the financial information herein is subject to change and any such change may be material.
The Balance Sheets do not reflect certain off-balance sheet commitments, including, but not limited to, those relating to real estate and private equity partnerships, made by the Company.
The Balance Sheets are not audited and do not expect to be subject to audit or review by external auditors at any time in the future.
Note 2 Use of Estimates
In preparing the Balance Sheets, the Company makes various estimates that affect reported amounts and disclosures. Broadly, those estimates are used in measuring fair values or expected recoverable amounts of certain financial instruments and other assets and establishing claims amounts and various reserves.
Estimates are based on available information and judgment. Therefore, actual results could differ from estimates and may have a material effect on the Balance Sheets thereto. As more information becomes available to the Company, including the outcome of various negotiations and litigation, it is expected that estimates will be revised.
Note 3 Cash and Short-Term Investments
Cash and short-term investments include demand deposits, interest-bearing deposits with banks, U.S. and foreign money-market funds, U.S. government obligations, U.S. government guaranteed securities, investment grade corporate bonds and commercial paper, and AAA-rated asset-backed securities secured by auto loans and credit card receivables. The majority of the short-term investments mature by June 30, 2014.
4
Note 4 Cash and Short-Term Investments Pledged or Restricted
The following table summarizes the components of restricted cash as of March 31, 2014:
Debtors | Debtor- Controlled Entities |
Total Debtors and Debtor- Controlled Entities |
||||||||||||||||||||||||||
LBHI |
LBSF |
LCPI |
Other |
Total |
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($ in millions) | ||||||||||||||||||||||||||||
Reserves for Claims: |
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Disputed unsecured claims (1) |
$ | 2,462 | $ | 2,390 | $ | 26 | $ | 1,632 | $ | 6,510 | $ | | $ | 6,510 | ||||||||||||||
Priority tax claims (2) |
390 | 117 | 0 | 5 | 512 | | 512 | |||||||||||||||||||||
Distributions on Allowed Claims (not remitted) (3) |
89 | 57 | 260 | 3 | 409 | | 409 | |||||||||||||||||||||
Secured, Admin, Priority Claims and Other (4) |
86 | 16 | 31 | 14 | 146 | | 146 | |||||||||||||||||||||
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Subtotal, Claims Reserves |
3,027 | 2,579 | 316 | 1,654 | 7,577 | | 7,577 | |||||||||||||||||||||
Cash pledged to JPMorgan (CDA) (5) |
313 | | | | 313 | | 313 | |||||||||||||||||||||
Citigroup and HSBC (6) |
2,040 | | | | 2,040 | | 2,040 | |||||||||||||||||||||
Other (7) |
188 | 1 | 57 | 29 | 275 | 133 | 408 | |||||||||||||||||||||
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Total |
$ | 5,568 | $ | 2,580 | $ | 373 | $ | 1,684 | $ | 10,205 | $ | 133 | $ | 10,338 | ||||||||||||||
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(1) | Represents the cash reserve for disputed unsecured claims subsequent to the fourth Plan distribution on October 3, 2013. |
(2) | Represents the cash reserve for Internal Revenue Service (IRS) amended proof of claim that was filed in December 2013. |
(3) | Represents unpaid Plan distributions to creditors with Allowed Claims of approximately $276 million primarily related to the unsecured 7th Avenue Claims against LCPI and LBSF as described in the Bankhaus Settlement Agreement included in Exhibit 3 of the Plan and approximately $133 million related to (i) claimants who failed to submit the proper taxpayer identification number forms and/or Office of Foreign Asset Control (OFAC) forms and (ii) other open items. |
(4) | Represents (i) post-petition intercompany payables of $71 million, (ii) disputed secured claims of $18 million, (iii) administrative claims of $2 million, and (iv) other administrative activities and other of $55 million. |
(5) | Represents $313 million of cash deposited into accounts by LBHI and pledged to JPMorgan (including its affiliates, JPM) pursuant to paragraph 6(b) of the Collateral Disposition Agreement (CDA) with JPM, effective March 31, 2010, related to, but not limited to, clearance exposures and derivative exposures pending resolution of these items. |
(6) | Represents cash deposited on or prior to the Commencement Dates by the Company in connection with certain requests and/or documents executed by the Company and Citigroup Inc. ($2,007 million) and HSBC Bank PLC ($33 million). The Company has recorded reserves against this cash in Secured Claims Payable to Third Parties as of March 31, 2014, because these institutions have asserted claims. The Company is in discussions with HSBC Bank and commenced litigation against Citigroup regarding these deposits. Accordingly, adjustments (netting against outstanding claims), which may be material, may be reflected in future Balance Sheets. |
(7) | Other includes: (i) $92 million related to various pre-petition balances on administrative hold by certain financial institutions, (ii) $69 million related to misdirected wires and other cash received by LBHI for the benefit of third parties and Non-Controlled Affiliates (reported as a payable), (iii) $55 million of cash collected by LCPI on behalf of a third party related to a loan participation agreement, (iv) $122 million of cash not remitted by Debtor-Controlled Entities to various Non-Controlled Affiliates, pending settlements on intercompany balances, for their pro rata share of distributions, and (v) $70 million primarily related to other miscellaneous items. |
Note 5 Financial Instruments and Other Inventory Positions
Financial instruments and other inventory positions are presented at fair value except, as described below, for certain Private Equity/Principal Investments and Derivative assets. Fair value is determined by utilizing observable prices or pricing models based on a series of inputs to determine the present value of future cash flows. The fair value measurements used to record the financial instruments described below may not be in compliance with GAAP requirements.
The values of the Companys financial instruments and other inventory positions (recorded on the Balance Sheets) may be impacted by market conditions. Accordingly, adjustments to recorded values, which may be material, may be reflected in future balance sheets.
5
Hedging Programs
Certain entities have instituted hedging programs in order to protect (i) the value of certain derivatives transactions that have not been terminated by counterparties, and (ii) against the loss of value from fluctuations in foreign exchange rates in real estate, derivatives, commercial loans and receivables from certain foreign affiliates. The cash posted as collateral, net of gains or losses on hedging positions, is reflected on the Companys Balance Sheets as of March 31, 2014 in Derivatives Receivables and Related Assets (approximately $35 million) and in Receivables from Controlled Affiliates and other assets (approximately $42 million).
Commercial Real Estate
Commercial Real Estate includes whole loans, real estate owned properties, joint venture equity interests in commercial properties, and other real estate related investments. The commercial real estate portfolio was valued as of December 31, 2013 adjusted for (i) cash activity from January 1, 2014 to March 31, 2014 and (ii) market values for certain positions to reflect either an agreed-upon sale contract in place or significant negotiations that established a range of values. The valuations of the commercial real estate portfolio, utilize pricing models, which incorporate estimated future cash flows, including satisfying obligations to third parties, discounted back at rates based on certain market assumptions. In many cases, inputs to the pricing models consider brokers opinions of value and third party analyses.
Loans and Residential Real Estate
Loans primarily consist of commercial term loans and revolving credit facilities with fixed maturity dates and are contingent on certain representations and contractual conditions applicable to each of the various borrowers. Loans are recorded at fair value. Residential Real Estate primarily includes mortgage backed securities, recoveries on claims, and other real estate related investments. Valuations for mortgage backed securities are based on third party valuations, including observable prices for similar assets, and valuation models utilizing discounted future cash flow estimates. Valuations for recoveries on claims are based on historical settlements, counterparty characteristics and management judgment. As of the date of the Balance Sheets, the Company has not determined a valuation for recoveries on the indemnity claims against third parties transferred to LBHI pursuant to the Fannie Mae Agreement.
Private Equity / Principal Investments
Private Equity/Principal Investments include equity and fixed-income direct investments in companies, and general partner and limited partner interests in investment fund vehicles (including private equity) and in related funds. Private equity/principal investments and general partner interests are primarily valued utilizing discounted cash flows and comparable trading and transaction multiples. Publicly listed equity securities are valued at period end quoted prices unless there is a contractual limitation or lock-up on the Companys ability to sell in which case a discount is applied. Fixed-income principal investments are primarily valued utilizing market trading, comparable spreads and yields, and recovery analysis. Limited partner interests in private equity and hedge funds are valued at the net asset value unless an impairment is assessed. Certain positions are subject to confidentiality restrictions and transfer restrictions for which the Company may need consent from sponsors, general partners and/or portfolio companies in order to (i) share information regarding such positions with prospective buyers and/or (ii) transfer such positions to a buyer.
Pursuant to an agreement in December 2013, the Company agreed to sell back to Neuberger Berman Group LLC (NBG) the remaining 193,492 Class A Units of NBG owned by the Company. The purchase price will be paid in installments through March 2015 and the outstanding balance is reflected in Receivables from Controlled Affiliates and Other Assets on the March 31, 2014 Balance Sheets.
Derivatives Assets and Derivatives Liabilities
Derivatives assets and derivatives liabilities (reflected in Liabilities Subject to Compromise in the Balance Sheets) represent amounts due from/to counterparties related to matured, terminated and open trades and are recorded at expected recovery/claim amounts, net of cash and securities collateral.
The Companys current estimate of recoveries, excluding affirmative litigation actions described in the Litigation Update of the Managements Discussion and Analysis, and claim amounts are determined using various models and data sources, assessment of contract provisions, valuation assumptions made by counterparties, negotiations and other factors.
For the Companys affirmative litigation actions, estimated recoveries are recorded at zero unless one of the following conditions are met: (i) the Company has reached agreements in principle with the corresponding counterparties, in which case the recovery value is recorded at the agreed amounts, and (ii) the Company has locked in value by purchasing notes of special purpose vehicles, in which case the recovery value is recorded at the value locked in.
The Company will continue to review amounts recorded for the derivatives assets and liabilities in the future as the Company obtains greater clarity on the issues referred to above including the results of negotiated and/or litigation settlements of allowed claims; accordingly, adjustments which may be material may be recorded in future balance sheets.
6
Derivatives claims are recorded (i) in cases where claims have been resolved, at values agreed by the Company and (ii) in cases where claims have not been resolved, at estimated claim amounts to be allowed by the Company. Derivative claims recorded by LBSF include (i) JPM claims transferred to LBHI under the CDA (defined below) and (ii) LBSFs obligations under the RACERS swaps.
Note 6 Subrogated Receivables from Affiliates and Third PartiesJPMorgan Collateral Disposition Agreement
The Company and JPM entered into a Collateral Disposition Agreement that became effective on March 31, 2010 (the CDA). The CDA provided for a provisional settlement of JPMs claims against the Debtors and LBHIs subrogation to JPMs alleged secured claims against LBI and certain other Affiliates. It also provided for the transfer of a portion of the collateral (RACERS Notes and other illiquid collateral) held by JPM that related to LBHI as subrogee to LBI (the Subrogated Collateral). Prior to the effective date of the LBI Settlement Agreement, LBHI had a receivable balance of approximately $6.5 billion (the Subrogated Receivables), comprised primarily of approximately $4.2 billion from LBI and approximately $1.7 billion from LBSF.
In accordance with the LBI Settlement Agreement (as defined in Note 9 Due from/to Affiliates) between LBHI and certain of its Debtor and Debtor-Controlled entities and LBI, LBI waived any rights to any proceeds of the Subrogated Collateral. As a result, LBHI reduced the portion of the Subrogated Receivables related to LBI of $4.2 billion and reflected the Subrogated Collateral with an equivalent value of $4.2 billion in the Balance Sheets as follows:
(i) | the Subrogated Collateral (excluding the RACERS Notes) in Financial Instruments and other inventory positions (consisting of residential mortgage backed securities) in the amount of $0.1 billion; |
(ii) | a General Unsecured Claim against LBI of $1.5 billion in Due from Non-Controlled Affiliates; and |
(iii) | a $2.6 billion receivable in Due From Controlled Affiliates for the allowed claims that the RACERS Structure asserted against LCPI, LBSF and LBHI in the face amounts of $5.0 billion, $1.9 billion and $1.9 billion, respectively (RACERS Claims). |
The Subrogated Receivables from Affiliates and Third Parties balance of approximately $2.1 billion as of March 31, 2014 consists primarily of receivables from LBSF of $1.7 billion and other Affiliates of $0.4 billion.
The ultimate recovery by LBHI will be determined by a number of factors including the distribution percentages expected to be paid by LBI, LBHI, LBSF, and LCPI to their respective unsecured creditors, the resolution of the JPM derivatives claim asserted against LBSF and LBHI, the proceeds from the Subrogated Collateral, and the resolution of litigation with JPM. The ultimate recoveries could be materially less than the Subrogated Receivables value, and accordingly, adjustments (including write-downs and write-offs) may be material and recorded in future Balance Sheets.
Note 7 Receivables from Controlled Affiliates and Other Assets
Receivables from Controlled Affiliates and Others Assets reflect certain post-petition activities, including: (i) receivables from controlled affiliates for activities amongst Debtors and Debtor-Controlled Entities for intercompany cash transfers (further described below), encumbered inventory, and administrative expense allocations totaling approximately $2.0 billion with the corresponding liability in Payables to Controlled Affiliates and other liabilities and (ii) other assets totaling approximately $535 million.
7
The following table summarizes the main components of Receivables from Controlled Affiliates and Other Assets as of March 31, 2014:
Debtors | Debtor- Controlled Entities |
Total Debtors and Debtor- Controlled Entities |
||||||||||||||||||||||||||
LBHI |
LCPI |
LBSF |
Other Debtors |
Total |
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$ in millions | ||||||||||||||||||||||||||||
Encumbered Financial Inventory (1) |
$ | | $ | 400 | $ | | $ | | $ | 400 | $ | | $ | 400 | ||||||||||||||
PIK Notes (2) |
16 | | 16 | 128 | 160 | | 160 | |||||||||||||||||||||
Fundings and other activites (3) |
328 | 81 | 0 | 468 | 877 | 558 | 1,435 | |||||||||||||||||||||
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Receivables from Controlled Affiliates |
344 | 481 | 16 | 596 | 1,438 | 558 | 1,995 | |||||||||||||||||||||
Receivable for unsettled sales of PEPI assets |
30 | | | | 30 | 92 | 122 | |||||||||||||||||||||
Receivables related to CRE assets |
40 | 11 | | | 51 | 19 | 70 | |||||||||||||||||||||
Receivable from Fenway (4) |
136 | | | | 136 | | 136 | |||||||||||||||||||||
Affiliate Claims (5) |
20 | 7 | 61 | 3 | 91 | | 91 | |||||||||||||||||||||
Derivative Hedges |
25 | 17 | | | 42 | | 42 | |||||||||||||||||||||
Foreign asset backed securities |
17 | | | | 17 | | 17 | |||||||||||||||||||||
Other |
21 | 3 | (0 | ) | 3 | 26 | 31 | 57 | ||||||||||||||||||||
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Total Other Assets |
288 | 37 | 61 | 6 | 393 | 142 | 535 | |||||||||||||||||||||
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Total Receivables from Controlled Affiliates and Other Assets |
$ | 632 | $ | 519 | $ | 78 | $ | 602 | $ | 1,830 | $ | 700 | $ | 2,531 | ||||||||||||||
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(1) | Represents Private Equity/Principal Investment assets encumbered to LCPI. |
(2) | Represents LOTCs, LBSFs and LBHIs portion of the PIK Notes issued by Lehman ALI Inc. (ALI), net of $190 million in payments. |
(3) | Includes (i) $420 million related to amounts deposited at LBHI by certain Debtors and Debtor-Controlled Entities related to their portion of the asserted aggregate tax liability of $510 million (refer to Note 4Cash and Short-Term Investments Pledged or Restricted for additional information; (ii) $372 million of cash held at LB Agency Co, LLC primarily on behalf of Luxembourg Residential Properties Loan Finance S.a.r.l.; (iii) $272 million primarily related to fundings by LBHI and cost allocations; (iv) $113 million related to amounts deposited at LBHI by certain Debtors related to their portion of the reserve allocation agreement related to the disputed claims against the Debtors; (v) $55 million in LBHI related to the Modified Settlement with respect to the Variable Funding Trust [Docket No. 19370]; and (vi) $38 million of secured receivables in LCPI from LBHI related to the unwind of the Kingfisher structure. |
(4) | Represents unsecured claims asserted by LBHI against LCPI based on the Fenway transactions, as disclosed in the Section 6.5 (h) of the Plan, net of $94 million payments received by LBHI as a result of Plan distributions. |
(5) | Represents affiliate claims acquired from settlements with third parties. |
Costs Allocation
Administrative expenses related to obligations for certain administrative services and bankruptcy related costs are initially paid by LBHI then allocated to significant Debtor and Debtor-Controlled Entities. The methodology for allocating such expenses is under periodic review by the Company, and a revised methodology was implemented for expenses disbursed beginning April 1, 2012 (the Post-Effective Methodology), and the resulting allocations are reflected in the accompanying Balance Sheets. The Post-Effective Methodology categorizes and allocates administrative expenses as follows:
(i) | Costs directly attributable to specific legal entities, such as dedicated staff costs and professional fees associated with assets or legal matters which benefit specific legal entities, are directly assigned to the corresponding legal entities; |
(ii) | Costs attributable to the support and management of specific asset portfolios, such as asset management staff, professional fees and technology costs to support the asset portfolios, are allocated to legal entities based on the pro rata ownership of inventory within each asset portfolio; |
(iii) | Restructuring costs associated with claims mitigation, distributions, and other bankruptcy-related activities are allocated to Debtor legal entities based on a combination of outstanding unresolved claims and cumulative distributions; and |
(iv) | All remaining administrative costs are allocated to legal entities based on a combination of net cash receipts, pro rata ownership of inventory, and outstanding unresolved claims. |
The Company continually reviews the methodology for allocating costs, and adjustments, which may be material, may be reflected in future Balance Sheets.
8
Intercompany Cash Transfers
Debtors and Debtor-Controlled Entities have engaged in cash transfers and transactions between one another. These transfers and transactions are primarily to support activities on behalf of certain Debtors and Debtor-Controlled Entities that may not have adequate liquidity for such things as funding private equity capital calls, restructuring certain investments, or paying operating expenses. For advances above a certain minimum dollar amount, the transferring Debtor may obtain a promissory note accruing interest and where available, collateral to secure the advanced funds. Since September 15, 2008, LBHI has advanced funds to, or incurred expenses on behalf of, certain Debtor-Controlled Entities. Similarly, LBHI and LCPI have received cash on behalf of Other Debtors and Debtor-Controlled Entities, most often in cases where the Other Debtors or Debtor-Controlled Entities have sold an asset and may not have a bank account to hold the proceeds received in the sale.
Note 8 Investments in Affiliates
Investments in Affiliates are reflected in the Balance Sheets at book values and Debtors and Debtor-Controlled Entities that incurred cumulative net operating losses in excess of capital contributions are reflected as a negative amount. The earnings or losses of Debtors owned by (i) Other Debtors (e.g. LBCS is a direct subsidiary of LBSF) or (ii) Debtor-Controlled Entities (e.g. LCPI is a direct subsidiary of Lehman ALI Inc., ALI) and the earnings or losses of Debtor-Controlled Entities owned by a Debtor (e.g. ALI is a direct subsidiary of LBHI) are not eliminated in the Balance Sheets and as a result, the Investments in Affiliates reflect the earnings or losses of Debtors and certain Debtor-Controlled Entities more than once. Adjustments to Investments in Affiliates may be required in future Balance Sheets (including write-downs and write-offs), as amounts ultimately realized may vary materially from amounts reflected on the Balance Sheets.
Controlled Entities Aurora Commercial Corp.
The investment in Aurora Commercial Corp. (formerly known as Aurora Bank FSB) (Aurora or ACC), a wholly owned subsidiary of Lehman Brothers Bancorp Inc. (LBB), which is a wholly owned subsidiary of LBHI, is reflected in LBBs Balance Sheets on a consolidated basis. The ultimate amounts realized for Aurora may be adjusted (including write-downs and write-offs) in future Balance Sheets which may vary materially from the amount reflected on the Balance Sheets due to significant costs to wind down and other potential liabilities.
Aurora is a party to various litigation matters, primarily matters asserting claims against it arising out of its mortgage servicing operations. Accruals will be established for loss contingencies if it becomes probable that a loss will be incurred and the amount of that loss can be estimated.
In connection with the various Aurora asset sales, LBB entered into certain guarantee agreements with the respective purchasers of the Aurora assets. In accordance with the terms of those agreements, LBB is potentially liable for an aggregate amount up to a maximum of $100 million, if Aurora fails to perform under its indemnity obligations to the purchasers of its assets. In addition, LBB is required to maintain a minimum stockholders equity equal to the maximum liability, plus $25 million, under the guarantees until termination, to occur upon the earlier of (i) the payment and performance in full of the guaranteed obligations and other amounts payable under the guarantees, (ii) the termination or expiration of all guaranteed obligations in accordance with the terms of the purchase agreements, (iii) the amount of LBBs liability being reduced to zero, and (iv) the third anniversary of the closing date.
In March 2014, LBB made a distribution of $128 million to its parent company and LBHI contributed a portion of its Non-Controlled Affiliate claim receivables to LBB.
Non-Controlled Affiliates
All investments in Non-Controlled Affiliates were written off in 2011 as the Company deemed recovery on these equity investments unlikely to occur due to the bankruptcy proceedings of the entities in their local jurisdictions.
Note 9 Due from/to Affiliates
Due from/to Affiliates represents (i) receivables for transactions among Debtors, Debtor-Controlled Entities and Non-Controlled Affiliates (separately or collectively, Affiliates) and (ii) payables by Debtor-Controlled Entities to Debtors and to Non-Controlled Affiliates. Certain balances are reflected in Due from and Due to as a result of certain assignments of claims against the Debtor and therefore are not netted. When applicable, these balances are net of cash distributions.
The Balance Sheets do not reflect potential realization or collectability reserves on the Due from Affiliates or an estimate of potential additional payables to Affiliates. As a result, adjustments (including write-downs and write-offs) to Due from Affiliates may be recorded in future Balance Sheets.
9
The following table summarizes the Due from/to Controlled Affiliates by counterparty for LBHI, LBSF and LCPI as of March 31, 2014:
$ in millions | LBHI | LBSF | LCPI | |||||||||||||||||||||
LBHI Controlled Affiliates | Due from | Due to (1) | Due from | Due to (1) | Due from | Due to (1) | ||||||||||||||||||
Lehman Brothers Holdings Inc |
$ | | $ | | $ | | $ | (13,981 | ) | $ | 38 | $ | (11,006 | ) | ||||||||||
LB Special Financing Inc (2) |
13,981 | (0 | ) | | | 87 | (560 | ) | ||||||||||||||||
Lehman Commercial Paper Inc |
11,006 | (38 | ) | 560 | (87 | ) | | | ||||||||||||||||
LB Commodity Services Inc |
727 | (41 | ) | | (312 | ) | | (3 | ) | |||||||||||||||
LB Commercial Corporation (2) |
265 | (18 | ) | 43 | | 140 | | |||||||||||||||||
Structured Asset Securities Corp |
425 | | 0 | | | (343 | ) | |||||||||||||||||
Merit, LLC |
| (18 | ) | | (15 | ) | 211 | | ||||||||||||||||
LB OTC Derivatives Inc (2) |
355 | | | | | | ||||||||||||||||||
RACERS Claim (3) |
2,090 | | | | | | ||||||||||||||||||
|
|
|||||||||||||||||||||||
Total Debtors |
$ | 28,849 | $ | (115 | ) | $ | 603 | $ | (14,396 | ) | $ | 476 | $ | (11,912 | ) | |||||||||
Lehman Ali Inc: |
||||||||||||||||||||||||
Lehman Ali Inc (PCO) |
| (2,973 | ) | | (0 | ) | 3,099 | | ||||||||||||||||
LB2 Limited |
255 | | 10 | | | (238 | ) | |||||||||||||||||
LB Pass - Through Securities Inc |
195 | | | | 211 | | ||||||||||||||||||
LCPI Properties Inc |
| (612 | ) | | | | | |||||||||||||||||
Ribco spc, Inc |
36 | | 39 | | | | ||||||||||||||||||
Ribco LLC |
| (225 | ) | 3 | | | | |||||||||||||||||
LB I Group Inc: |
||||||||||||||||||||||||
LB I Group Inc (PCO) |
2,737 | (6 | ) | 11 | | 77 | (1 | ) | ||||||||||||||||
LB Offshore Partners Ltd |
427 | | | (0 | ) | 1 | | |||||||||||||||||
DL Mortgage Corp |
| (228 | ) | 0 | | 809 | | |||||||||||||||||
314 Commonwealth Ave Inc: |
||||||||||||||||||||||||
314 Commonwealth Ave Inc (PCO) |
1,170 | (17 | ) | | (2 | ) | | | ||||||||||||||||
Stockholm Investments Limited |
| (143 | ) | | (0 | ) | | | ||||||||||||||||
LB U.K. Holdings (Delaware) Inc: |
||||||||||||||||||||||||
LB U.K. Holdings (Delaware) Inc (PCO) |
318 | | | | | | ||||||||||||||||||
Caistor Trading BV |
| (103 | ) | 110 | | | | |||||||||||||||||
Other: |
||||||||||||||||||||||||
Pami Ali LLC |
1,919 | (78 | ) | 1 | | 897 | (4 | ) | ||||||||||||||||
Luxembourg Finance Sarl |
844 | | 28 | | | | ||||||||||||||||||
ARS Holdings II LLC |
643 | | | | | | ||||||||||||||||||
Real Estate Private Equity Inc |
693 | | | | | | ||||||||||||||||||
L.B.A. YK |
290 | | | | | | ||||||||||||||||||
LB Delta Funding Limited |
236 | | | | | | ||||||||||||||||||
LBHK Funding (Cayman) No.4 |
185 | | | | | | ||||||||||||||||||
Pami LBREP II LLC |
162 | | | | | | ||||||||||||||||||
Lehman Brothers Global Services Inc. |
104 | | | (0 | ) | | (0 | ) | ||||||||||||||||
LB Private Equity Advisers LLC |
| (106 | ) | | (0 | ) | | | ||||||||||||||||
Lehman Investment Inc |
| (119 | ) | | (31 | ) | 172 | | ||||||||||||||||
LB 745 Leaseco I LLC |
| (144 | ) | | | | | |||||||||||||||||
Other |
762 | (850 | ) | 23 | (7 | ) | 147 | (76 | ) | |||||||||||||||
LB Re Financing No.1 Limited |
6,977 | | | | | | ||||||||||||||||||
|
|
|||||||||||||||||||||||
Total Debtor-Controlled Entities |
$ | 17,954 | $ | (5,604 | ) | $ | 225 | $ | (41 | ) | $ | 5,412 | $ | (319 | ) | |||||||||
|
|
|||||||||||||||||||||||
$ | 46,803 | $ | (5,719 | ) | $ | 828 | $ | (14,437 | ) | $ | 5,888 | $ | (12,231 | ) | ||||||||||
|
|
Entities listed under the caption LBHI Controlled Affiliates represent the LBHI controlled affiliates (included in the consolidated group identified in bold), which has the receivable or payable directly with LBHI, LBSF and LCPI. Other represents significant balances which for presentation purpose are aggregated in Other Debtor-Controlled in the Balance Sheets. PCO is defined as parent company only.
(1) | Due to balances with Controlled Affiliates are reflected in Liabilities Subject to Compromise on the March 31, 2014 Balance Sheets. |
(2) | Includes claims assigned to LBHI as part of LBF Settlement Agreement (pursuant to Section 8.11 of the Plan, which requires that claims transferred after the Confirmation Date are to be treated for distribution purposes as if such claim were held by the transferor who held such claim of the Commencement Date of the Bankruptcy). |
10
(3) | For further discussion of RACERS Claims refer to Note 6 Subrogated Receivables from Affiliates and Third Parties. |
(4) | During the quarter ended March 31, 2014, certain entities were liquidated and their claims of approximately $440 million against their parents (LBHI for $325 million and LCPI for $115 million) as of March 31, 2014 were assigned to their respective parents. As LBHI and LCPI are current holders of claims against themselves, the receivables and payables are netted in the Balance Sheets. |
The following table summarizes the Due from/to Non-Controlled Affiliates by counterparty for LBHI, LBSF and LCPI as of March 31, 2014:
LBHI | LBSF | LCPI | ||||||||||||||||||||||
$ in millions | Due from (7) | Due to (8) | Due from (7) | Due to (8) | Due from (7) | Due to (8) | ||||||||||||||||||
Lehman Brothers Treasury Co B.V. (1) |
$ | 2,736 | $ | (28,906 | ) | $ | 854 | $ | | $ | | $ | | |||||||||||
Lehman Brothers Finance S.A. (2) |
10,993 | (790 | ) | | | 0 | | |||||||||||||||||
Lehman Brothers Bankhaus A.G. (3) |
78 | (6,210 | ) | | (177 | ) | | (1,076 | ) | |||||||||||||||
Lehman Brothers Inc. (4) |
6,082 | | | | 28 | | ||||||||||||||||||
LB RE Financing No.2 Limited (5) |
0 | (5,682 | ) | | | | | |||||||||||||||||
Lehman Brothers Asia Holdings Limited |
4,903 | (1 | ) | | (25 | ) | | (129 | ) | |||||||||||||||
Lehman Brothers Securities NV (1) |
3,701 | (4,329 | ) | | (54 | ) | | | ||||||||||||||||
LB UK Financing Ltd (6) |
3,465 | | | | | | ||||||||||||||||||
LB SF No.1 Ltd (6) |
| (2,540 | ) | | | | | |||||||||||||||||
LB Commercial Corp. Asia Limited |
1,611 | | 11 | | | (1 | ) | |||||||||||||||||
Lehman Brothers International (Europe) Inc. |
9 | (931 | ) | | (653 | ) | 2 | | ||||||||||||||||
Lehman Brothers (Luxembourg) S.A. |
829 | | | | | | ||||||||||||||||||
LB RE Financing No.3 Limited |
| | 589 | | | | ||||||||||||||||||
Lehman Re Limited |
| (353 | ) | | (18 | ) | | (274 | ) | |||||||||||||||
LB UK RE Holdings Limited |
413 | | 13 | | | (5 | ) | |||||||||||||||||
Lehman Brothers Japan Inc. |
| (138 | ) | | (156 | ) | | | ||||||||||||||||
LB Asia Pacific (Singapore) PTE |
366 | | | | | | ||||||||||||||||||
LB Investments PTE Ltd |
299 | | | | | | ||||||||||||||||||
Thayer Properties Limited |
274 | | | | | (0 | ) | |||||||||||||||||
LB (PTG) Ltd |
262 | | | | 0 | | ||||||||||||||||||
LB Lease & Finance No.1 Ltd |
186 | | | | | | ||||||||||||||||||
LB (Luxembourg) Equity Finance S.A |
131 | (113 | ) | | | | | |||||||||||||||||
Lehman Brothers Asia Limited |
| (154 | ) | | | | (0 | ) | ||||||||||||||||
LB Securities Asia Limited |
263 | (168 | ) | | | | | |||||||||||||||||
Wood Street Investments Ltd |
| (232 | ) | | | | | |||||||||||||||||
LB Holdings Intermediate 2 Ltd |
| (256 | ) | | | | | |||||||||||||||||
Lehman Brothers Limited |
| (303 | ) | | (3 | ) | | (1 | ) | |||||||||||||||
LB UK Holdings Limited |
| (512 | ) | | | | | |||||||||||||||||
LB Asia Capital Company |
31 | (519 | ) | 37 | | 168 | | |||||||||||||||||
Eldon Street Holdings Limited |
| (538 | ) | | | | (0 | ) | ||||||||||||||||
Storm Funding Ltd |
| (790 | ) | | (4 | ) | | (102 | ) | |||||||||||||||
Longmeade Limited |
19 | | | | | (100 | ) | |||||||||||||||||
Other |
737 | (561 | ) | 16 | (157 | ) | 5 | (62 | ) | |||||||||||||||
|
|
|||||||||||||||||||||||
Total |
$ | 37,387 | $ | (54,023 | ) | $ | 1,520 | $ | (1,248 | ) | $ | 203 | $ | (1,751 | ) | |||||||||
|
|
The schedule represents balances with Non-Controlled Affiliates that have settled or are being managed by a third party liquidator.
(1) | Lehman Brothers Treasury Co. B.V. (LBT) and Lehman Brothers Securities N.V. (LBS) are included in the defined term Non-Controlled Affiliates, but LBHI has no direct or indirect equity interest in either LBT or LBS. |
(2) | Due from balances with LBF reflect the settlement agreement entered into with LBF whereas LBHI received an allowed claim of $8,750 million (refer to LBF Settlement Agreement section below for additional information) adjusted for (i) an increase of $2 billion related to foreign currency translation from the date of the LBF Settlement Agreement to the date of the Balance Sheets and (ii) an increase in Due from of $192 million for amounts that were withheld by LBF from payments to LBHI for an indemnity escrow and other holdbacks from proceeds LBF had previously received on assigned affiliate claims. Due to balances reflect LBFs allowed claim of $943 million adjusted for the LBHI distributions to LBF of approximately $153 million in March 2014. |
11
(3) | LBSF payable to Lehman Brothers Bankhaus A.G. (Bankhaus) includes approximately $3 million of secured payables reported on the Balance Sheets in Secured Claims Payable to Third Parties. |
(4) | LBHI balance with Lehman Brothers Inc. (LBI) includes a General Unsecured Claim against LBI of $1.5 billion related to the subrogated claim of JPM against LBI. |
(5) | Distributions from LBHI to LB RE Financing No.2 Limited (FIN2) are remitted from FIN2 to LB RE Financing No. 1 Limited (FIN1); these distributions are paid from FIN1 to LBHI to satisfy its obligations. |
(6) | In September 2013 LBHI has entered into a temporary arrangement with the administrator for LBSF No.1 Limited and LB UK Financing Limited to withhold payments due from LBHI to these entities pending the finalization of an agreement to offset these payments against related receivables from these entities. |
(7) | Due From balances are recorded in the local currency of the Non-Controlled Entity and as a result, balances fluctuate as a result of changes in foreign exchange rates. |
(8) | Due to balances with Non-Controlled Entities are reflected in Liabilities Subject to Compromise on the March 31, 2014 Balance Sheets. |
(9) | The following table represents gross receivables less collections received to date between certain Debtors and certain Non-Controlled Affiliates: |
LBHI | ||||||||||||
$ in millions |
Gross Claims |
Collections | Net Receivables |
|||||||||
Lehman Brothers Asia Holdings Limited |
$ | 9,120 | $ | (4,217 | ) | $ | 4,903 | |||||
Lehman Brothers Securities NV (a) |
4,411 | (710 | ) | 3,701 | ||||||||
Lehman Brothers Treasury Co B.V (a) |
3,275 | (539 | ) | 2,736 | ||||||||
LB UK Financing Ltd (6) |
3,573 | (108 | ) | 3,465 | ||||||||
LB Commercial Corp. Asia Limited |
2,299 | (688 | ) | 1,611 | ||||||||
LB UK RE Holdings Limited |
726 | (314 | ) | 413 | ||||||||
Lehman Brothers International (Europe) Inc. |
94 | (85 | ) | 9 | ||||||||
|
|
|
|
|
|
|||||||
$ | 23,404 | $ | (6,576 | ) | $ | 16,828 | ||||||
LBSF | ||||||||||||
Gross Claims |
Collections | Net Receivables |
||||||||||
Lehman Brothers Treasury Co B.V. |
$ | 1,023 | $ | (169 | ) | 854 | ||||||
LB UK RE Holdings Limited |
22 | (10 | ) | 13 | ||||||||
LB Commercial Corp. Asia Limited |
17 | (6 | ) | 11 | ||||||||
|
|
|
|
|
|
|||||||
$ | 1,062 | $ | (184 | ) | $ | 878 |
(a) | In March 2014, LBHI received approximately $1,066 million from LBF, which consisted of (i) amounts held in escrow by LBF on claims against LBS, LBT and Lehman Brothers Europe Limited (assigned to LBHI as part of the LBF Settlement Agreement) of $710 million, $539 million and $9 million, respectively, reduced by (ii) $192 million withheld by LBF from its payment to LBHI for an indemnity escrow and other holdbacks. |
12
The following table summarizes the Due from/to Affiliates by counterparty for certain Debtor-Controlled Entities as of March 31, 2014:
$ in millions | Lehman ALI Inc. | LB I Group Inc. | 314 Commonwealth Ave. Inc. |
LB UK Holdings Delaware Inc. |
Other Debtor- Controlled Entities |
|||||||||||||||||||||||||||||||||||
Controlled Affiliates: | Due from | Due to | Due from | Due to | Due from | Due to | Due from | Due to | ||||||||||||||||||||||||||||||||
Debtors: |
||||||||||||||||||||||||||||||||||||||||
Lehman Brothers Holdings Inc. |
$ | 3,810 | $ | (486 | ) | $ | 234 | $ | (3,164 | ) | $ | 161 | $ | (1,170 | ) | $ | 103 | $ | (318 | ) | $ | 447 | $ | (5,077 | ) | |||||||||||||||
Lehman Commercial Paper Inc. |
238 | (3,310 | ) | 1 | (886 | ) | | | | | 4 | (1,069 | ) | |||||||||||||||||||||||||||
Lehman Brothers Special Financing Inc. |
| (52 | ) | | (11 | ) | 2 | | | (110 | ) | 31 | (28 | ) | ||||||||||||||||||||||||||
LB 745 LLC |
| | | | | | | | | (100 | ) | |||||||||||||||||||||||||||||
Luxembourg Residential Properties Loan Fin S.a.r.l. |
| | | | 545 | | | | | | ||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||
Total Debtors |
$ | 4,048 | $ | (3,848 | ) | $ | 235 | $ | (4,061 | ) | $ | 708 | $ | (1,170 | ) | $ | 103 | $ | (428 | ) | $ | 482 | $ | (6,273 | ) | |||||||||||||||
Debtor-Controlled: |
||||||||||||||||||||||||||||||||||||||||
314 Commonwealth Ave Inc |
$ | 75 | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | | ||||||||||||||||||||
Lehman Ali Inc |
| | | | | (75 | ) | | | 280 | | |||||||||||||||||||||||||||||
REPE LBREP III LLC |
| | | | | | | | 136 | | ||||||||||||||||||||||||||||||
Real Estate Private Equity Inc |
| | | | | | | | 222 | | ||||||||||||||||||||||||||||||
LB I Group Inc |
| | | | | | | | | (321 | ) | |||||||||||||||||||||||||||||
LCPI Properties Inc |
| | | | | | | | | (180 | ) | |||||||||||||||||||||||||||||
Pami ALI LLC |
180 | (280 | ) | 321 | | | | | | | (358 | ) | ||||||||||||||||||||||||||||
Other |
164 | (158 | ) | 66 | (72 | ) | 0 | (54 | ) | 181 | (796 | ) | 1,635 | (959 | ) | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||
Total Debtor-Controlled Entities |
$ | 419 | $ | (438 | ) | $ | 387 | $ | (72 | ) | $ | 0 | $ | (128 | ) | $ | 181 | $ | (796 | ) | $ | 2,272 | $ | (1,817 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||
Total |
$ | 4,467 | $ | (4,286 | ) | $ | 622 | $ | (4,133 | ) | $ | 708 | $ | (1,298 | ) | $ | 284 | $ | (1,224 | ) | $ | 2,754 | $ | (8,090 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||
Non-Controlled Affiliates: (1) |
||||||||||||||||||||||||||||||||||||||||
Lehman Brothers Holdings Intermediate 2 Ltd |
$ | | $ | | $ | | $ | | $ | | $ | | $ | 77 | $ | | $ | 749 | $ | | ||||||||||||||||||||
LB UK RE Holdings Limited |
| | | | 659 | | 76 | | 2 | (0 | ) | |||||||||||||||||||||||||||||
Lehman Brothers Holdings PLC |
| | | (1 | ) | | | 167 | | | (1 | ) | ||||||||||||||||||||||||||||
LB ODC 3 |
| | | | | | 162 | | | | ||||||||||||||||||||||||||||||
Lehman Brothers Asia Holdings Limited |
1 | (7 | ) | | (31 | ) | 1 | | 2 | (47 | ) | 668 | (507 | ) | ||||||||||||||||||||||||||
Other |
90 | (11 | ) | 7 | (6 | ) | 27 | (15 | ) | 810 | (83 | ) | 649 | (962 | ) | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||||||||||
Total |
$ | 91 | $ | (19 | ) | $ | 7 | $ | (38 | ) | $ | 687 | $ | (15 | ) | $ | 1,294 | $ | (130 | ) | $ | 2,068 | $ | (1,470 | ) | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
(1) | Certain Due from balances are recorded in the local currency of the Non-Controlled Entity and as a result, balances fluctuate as a result of changes in foreign exchange rates. Due from/Due to balances include both settled and unsettled balances with Non-Controlled Affiliates. |
Joint Venture to Facilitate Resolution of LBIE Claims
On January 31, 2014, Lehman Brothers Holdings Intermediate 2 Ltd. (LBHI2), a Non-Controlled Affiliate, LBHI, and Elliott Management Corporation and King Street Capital Management, L.P. (together the Funds) entered into definitive documentation and consummated the Joint Venture previously announced on November 21, 2013. LBHI2 contributed to the Joint Venture its senior and subordinated claims (approximately GBP 1.3 billion) and a portion of the economic interest in the preferred equity in LBIE. The Funds paid approximately GBP 650 million to LBHI2 and contributed to the Joint Venture the distributions on their claims against LBIE (approximately GBP 2.6 billion as of January 31, 2014) in excess of the principal amount plus post-administration interest at 8% per year.
The Joint Venture includes a joint recovery pool which is governed by a specific sharing formula. Subject to certain adjustments, which could be material, all recoveries from the Sub Debt, Senior Claims and the Funds contribution are split as follows: (a) 100% to the Funds up to GBP 650 million; (b) then 70% to the Funds and 30% to LBHI2 up to GBP 1.3 billion (plus interest); (c) then 50% to the Funds and 50% to LBHI2 up to GBP 2.2 billion (plus interest); and (d) 25% to the Funds and 75% to LBHI2 over GBP 2.2 billion (plus interest). A detailed summary of the terms of the parties commitments and the Joint Venture is available at www.lehman-docket.com in the key documents section.
The Company has receivables and has filed proof of debt for receivables from LBHI2 at (i) Luxembourg Finance Sarl (Lux Finance) of $730 million of fixed rate notes, plus $19 million of interest accrued through the date LBHI2 entered administration, and (ii) LB Scottish Holdings LP3 (SLP3) of $77 million. In previous balance sheets, the Company reserved in full for the subordinated receivables from LBHI2 of $6.139 billion, (SLP3 Sub Rec). As of March 31, 2014, the Company has not recorded an estimate of future recoveries on the SLP3 Sub Rec or additional accrued interest that may accrue subsequent to LBHI2 administration date at Lux Finance and/or SLP3 as ultimate recoveries depend on the resolution of legal issues.
In addition, any future recoveries from LBHI2 at Non-Controlled Affiliates may indirectly benefit the Company through the repayment of certain its Non-Controlled Affiliates receivables.
13
For additional information related to Lux Finance intercompany affiliate creditors, please refer to Due from/to Controlled Affiliates by counterparty for LBHI, LBSF and LCPI and Due from/to Controlled Affiliates by counterparty for certain Debtor-Controlled Entities tables above. LB UK Holdings Delaware is the indirect parent and thus would be the beneficiary of any proceeds paid pursuant to SLP3 Sub Rec although a receivable has not been recorded on the books of LB UK Holdings Delaware.
As described in LBHI2 Joint Administrators Progress Report for the Period 14 July 2013 to 13 January 2014, LBHI2 filed a proof of debt for its claims against LBIE for GBP 1,292,255,510 comprised of a claim for GBP 1,254,165,598 ($2.225 billion) of subordinated debt (the Sub Debt) and a non-subordinated claim for GBP 38,089,911 (the Senior Claim). As of March 31, 2014, LBIE has not admitted the submitted claims. As provided by the LBHI2s Joint Administrator, LBHI2s recoveries and distributions will be determined based on a number of legal issues.
If LBIE makes distributions on the preferred equity before aggregate distributions from the Joint Venture to the Funds and LBHI2 have reached GBP 2.2 billion (plus interest) then, in certain circumstances, LBHI2, Lux Finance and LBHI shall be obligated to make payments to preserve the economic terms of the transaction as if 100% of the Preferred Equity proceeds had been transferred by LBHI2 to the Joint Venture.
LBF Settlement Agreement
LBHI and certain of its Debtor and Debtor-Controlled Entities and Lehman Brothers Finance AG (in Liquidation), also known as Lehman Brothers Finance SA (in liquidation) (LBF) entered into an agreement (LBF Settlement Agreement), dated on March 27, 2013 to settle all intercompany claims between them. For further information, refer to the motion [Docket No. 36300] filed by LBHI. As the LBF Settlement Agreement became effective on March 21, 2014 (Effective Date), the terms of the LBF Settlement Agreement have been reflected in the Balance Sheets as of March 31, 2014.
In consideration for the Tschira Entities (as defined in the Docket No. 43309) withdrawing their objection with prejudice to the LBF Settlement Agreement, the Guarantee Claim against LBHI was reinstated and allowed as a single allowed Guarantee Claim in LBHI Class 9A if, and to the extent, the Tschira Entities ultimately receive an allowed claim against LBF.
The following table reflects only (i) the allowed claims between LBHI and LBF and (ii) the LBF Assigned Receivables as of the Effective Date:
$ in millions | Receivables/ (Payables) |
Comments | ||||
Allowed claims between LBHI and LBF |
||||||
Payable to LBF |
$ | (943 | ) | Note 1 - LBF claim against LBHI | ||
Receivable from LBF |
8,750 | Note 2 - LBHI claim against LBF | ||||
LBF Receivables assigned to LBHI (3) |
||||||
LBS |
4,411 | |||||
LBT |
3,275 | |||||
LOTC |
316 | |||||
LBSF |
32 | |||||
LBCC |
130 | |||||
Other-Controlled Entities |
2 | |||||
Non-Controlled Affiliates |
1,080 | |||||
|
|
|||||
Total LBF Receivables assigned to LBHI |
$ | 9,246 | ||||
|
|
(1) | LBF has an Allowed Lehman Program Securities (LPS) Claim in the amount of approximately $943 million against LBHI on account of LBHIs guarantee of certain securities held by LBF. Although this claim is classified as a Senior Affiliate Guarantee Claim under the Plan (LBHI Class 4B), LBF has agreed to treatment of the claim as a Senior Third Party Guarantee Claim (LBHI Class 5). |
(2) | LBHI has an allowed claim against LBF in the amount of CHF 9.548875 billion (corresponding to approximately $8.75 billion converted from Swiss Francs at the rate of USD/CHF 1.0913 at March 27, 2013). LBHI has also agreed to subordinate partially the LBHI Claim to the claims of the LBFs third-party creditors. Specifically, LBF will implement a waterfall (the LBF Waterfall) in its liquidation that provides an initial priority recovery to general unsecured third-party creditors of $1.275 billion (provided that no such creditor shall receive more than 50% of its allowed claim). LBFs affiliate creditors shall receive a priority distribution equal, on a percentage basis, to the priority recovery of LBFs third party creditors. Following this initial priority distribution, LBHI will participate pro rata with all creditors in LBFs distributions. |
(3) | LBF assigned to LBHI all of its right, title and interest in claims that LBF asserted against certain other Lehman affiliates as set forth in the LBF Settlement Agreement (and which formed the basis for LBFs asserted guarantee claims against LBHI) (the LBF Claim Assignment). The assigned claims include LBFs claims against (i) LBS, which LBS allowed in the amount of |
14
approximately $4.411 billion, (ii) LBT, which LBT allowed in an amount equal to approximately $3.275 billion, (iii) Debtors and Debtor-Controlled Entities which were allowed, and (iv) Non-Controlled Affiliates consisting of balances with LBI and LB Equity Finance (Lux) which were settled and LB Securities Asia Ltd, LBCCA, and Bankhaus, which have not settled and may be subject to changes. |
Note 10 Payables to Controlled Affiliates and Other Liabilities
Payables to Controlled Affiliates and Others Liabilities reflects: (i) payables to controlled affiliates for activities amongst Debtors and Debtor-Controlled Entities for cash transfers, encumbered inventory and administrative expenses allocation totaling approximately $2.0 billion with the corresponding receivables in Receivables from Controlled Affiliates and Other Assets and (ii) other liabilities totaling approximately $808 million. The following table summarizes the main components of Payables to Controlled Affiliates and Other Liabilities as of March 31, 2014:
$ in millions | Debtors | Debtor- Controlled Entities |
Total Debtors and Debtor- Controlled Entities |
|||||||||||||||||||||||||
LBHI | LCPI | LBSF | Other Debtors |
Total | ||||||||||||||||||||||||
Encumbered Financial Inventory (1) |
$ | | $ | | $ | | $ | | $ | | $ | 400 | $ | 400 | ||||||||||||||
PIK Notes (2) |
| | | | | 160 | 160 | |||||||||||||||||||||
Fundings and other activities (3) |
617 | 133 | 32 | 1 | 783 | 652 | 1,435 | |||||||||||||||||||||
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Payables to Controlled Affiliates |
617 | 133 | 32 | 1 | 783 | 1,213 | 1,996 | |||||||||||||||||||||
Distributions on Allowed Claims (not remitted) |
89 | 260 | 57 | 3 | 408 | | 408 | |||||||||||||||||||||
Misdirected wires |
69 | | | | 69 | | 69 | |||||||||||||||||||||
Loan Participation Agreement |
| 55 | | | 55 | | 55 | |||||||||||||||||||||
Other |
28 | 37 | (0 | ) | 5 | 70 | 205 | 276 | ||||||||||||||||||||
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Total Other Liabilities |
186 | 352 | 57 | 8 | 603 | 205 | 808 | |||||||||||||||||||||
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Total Payables to Controlled Affiliates and other liabilities |
$ | 803 | $ | 485 | $ | 88 | $ | 9 | $ | 1,386 | $ | 1,418 | $ | 2,804 | ||||||||||||||
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(1) | Represents Private Equity/Principal Investment assets encumbered to LCPI. |
(2) | Represents a secured payable from ALI to LOTC, LBHI, and LBSF related to the PIK Notes net of $190 million in payments. |
(3) | Includes (i) $420 million related to amounts deposited at LBHI by certain Debtors and Debtor-Controlled Entities related to their portion of the asserted aggregate tax liability of $510 million (refer to Note 4 Cash and Short-Term Investments Pledged or Restricted for additional information; (ii) $372 million of cash held at LB Agency Co, LLC on behalf of certain Debtors; (iii) $272 million primarily related to fundings by LBHI and cost allocations; (iv) $113 million related to amounts deposited at LBHI by certain Debtors related to their portion of the reserve allocation agreement related to the disputed claims against the Debtors; (v) $55 million in LBHI related to the Modified Settlement with respect to the Variable Funding Trust [Docket No. 19370] ; and (vi) $38 million of secured receivables in LCPI from LBHI related to the unwind of the Kingfisher structure. |
Note 11 Taxes Payable
As of March 31, 2014, the Company has recorded an estimated $579 million for potential pre- and post-petition amounts owed to federal, state, local and international taxing authorities. The taxes payable is net of any refund claims and the estimated impact of the five-year federal NOL carryback. The reduction of $171 million in taxes payables since December 31, 2013 reflects recent Federal and State settlements and settlements-in-principle and has been allocated among the members of the LBHI tax group pursuant to the Debtor Allocation Agreement (the DAA), as discussed below. The balance in Taxes Payable for LBSF (including an amount previously recorded in Receivables from Controlled Affiliates and other assets) represents a receivable from the consolidated LBHI tax group for tax payments made in excess of estimated tax liabilities.
LBHI historically had a receivable for the estimated amount of LBIs portion of taxes. In February 2013, a global settlement was reached on all intercompany transactions between LBHI and LBI, including an allowed priority claim against LBI, equivalent to the level afforded to a taxing authority. The settlement as it pertains to tax generally covers all pre - and post-petition consolidated federal/combined state and local liabilities through the deconsolidation of LBI from the tax group. On November 20, 2013, LBI was deconsolidated from the tax group upon the disposition of a portion of its stock.
The DAA, which became effective on the Effective Date, includes the following key tax-related provisions: (i) additional claims between/among the Debtors (are treated as pre-petition unsecured claims to the extent related to tax years 2008 and prior) has been allowed in order to reflect the appropriate allocation of any audit changes/adjustments to the LBHI consolidated federal/combined state and local income tax returns (including by way of amended returns), taking into account historic tax sharing principles, and (ii) in the event that any member of the LBHI consolidated federal/combined state and local income tax group does not satisfy its share of the final tax liabilities, LBHI will equitably allocate the unsatisfied liability between/among all Debtor members of its consolidated federal/combined state and local income tax group. By reason of the LBI settlement, LBHI will be responsible for the portion of any
15
group tax liability that would have been allocated to LBI. In accordance with the DAA, the Company has recorded an estimate of the impact of the Federal and State settlements and settlements-in-principle to the respective members of the tax group, including an estimate of any additional pre-petition unsecured claims between/among the debtors (in some cases resulting in an increase in an individual members liability based on the underlying audit adjustments despite the reduction in the groups tax liability overall).
The DAA also addresses the relationship among the Debtors and certain Affiliates with respect to consolidated federal/combined state and local income taxes for tax years ending after the Effective Date.
The IRS filed an initial Proof of Claim on December 22, 2010 in the amount of approximately $2.2 billion against the Company with respect to the consolidated federal income tax returns LBHI filed on behalf of itself and its subsidiaries for the 2001 through 2007 tax years. On December 9, 2013, the IRS filed an interim amended proof of claim of approximately $500 million, reflecting the impact of numerous resolved issues (many of which were the subject of prior Bankruptcy Court approval) and the estimated value of the five-year NOL carryback claim. As of the interim proof of claim, only two known federal tax issues with respect to pre-petition tax years remain unresolved: (i) stock loan (currently in litigation) and (ii) a withholding tax issue (currently the subject of a settlement-in-principle). The IRS is auditing the consolidated federal income tax returns of the LBHI group for the tax years 2008-2010, including the amount of the 2008 net operating loss. Further, the LBHI consolidated group has several hundred million dollars on deposit with the IRS for the tax years 1997 through 2000 and 2006, as to which the IRS has preserved the right of offset or counterclaim.
In certain circumstances, any member of the tax group may be subject to withholding taxes, transactional taxes or taxes on income in certain jurisdictions with respect to the realization of financial positions as assets are disposed of during the course of liquidation.
Note 12 Liabilities Subject to Compromise
Liabilities Subject to Compromise as of March 31, 2014 have been estimated at approximately $274 billion, net of distributions and adjustments.
Over $1.3 trillion of claims have been asserted against the Debtors. To date, the Company has identified many claims that it believes should be disallowed for a number of reasons, including but not limited to claims that are duplicative of other claims, claims that are amended by later filed claims, late filed claims, claims that are not properly filed against a Debtor in these proceedings and claims that are either overstated, asserted an incorrect priority or that cannot otherwise properly be asserted against these Debtors. Through March 31, 2014, the Debtors have allowed approximately $315.1 billion in claims and continue working to reconcile and resolve the remaining disputed claims.
There is a significant unliquidated claim against BNC (Claim No. 31036) which, if liquidated and allowed, would have a material impact on the recoveries to BNC claimants and would result in creditors receiving significantly less than a 100% recovery on their claims. In accordance with the Plan, the Company has continued to make distributions to allowed claimants of BNC.
In preparing the Balance Sheets, the Company has reviewed all available claims data as it relates to each of the Debtors. As of March 31, 2014, the Company has reduced its estimates of Liabilities Subject to Compromise for certain Debtors by approximately $1.7 billion from December 31, 2013 primarily due to the Freddie Mac Settlement Agreement partially offset by the settlement with LBF. The Company will continue to review its estimate of Liabilities Subject to Compromise as more information becomes available in the future, including such items as claims settlements, distributions and Court decisions. Determinations of allowed amounts may be higher or lower than the recorded estimates, and accordingly, adjustments, which may be material, may be recorded in future Balance Sheets.
Freddie Mac Settlement Agreement
LBHI, ACC, Aurora Loan Services (ALS) and Freddie Mac agreed to a settlement agreement (Freddie Mac Agreement) [Docket No. 42754], as approved by the Bankruptcy Court on February 19, 2014. The Freddie Mac Agreement primarily provided for a one-time cash payment of $767 million by LBHI to Freddie Mac. As a result, the Company reduced the Liabilities Subject to Compromise balance by $2.0 billion, which represented the estimated claims liability amount reflected in the Balance Sheets as of December 31, 2013 and released the cash reserve of $1.2 billion on account of these claims, in the Balance Sheets as of March 31, 2014. LBHI reinstated, for purposes of parity of classes, two Freddie Mac claims to itself amounting to $1.8 billion (Claim No.33568 allowed for approximately $1.2 billion and Claim No.33576 allowed for approximately $0.6 billion).
Federal National Mortgage Association Settlement Agreement
LBHI, ACC, ALS and the Federal National Mortgage Association (Fannie Mae) agreed to a settlement agreement (Fannie Mae Agreement) [Docket No. 42153], as approved by the Bankruptcy Court on January 31, 2014. The Fannie Mae Agreement provides, among other things, for the (i) Fannie Mae Claim to be allowed in the amount of $2.15 billion in LBHI Class 7, (ii) transfer of certain documents and information from Fannie Mae to LBHI in order to allow LBHI to pursue indemnity claims against various third parties for breaches of representations and warranties, and (iii) release of any other claims that Fannie Mae may have against LBHI, ACC, ALS or other Debtors.
16
Distributions Pursuant to Plan
The Debtors have made distributions through April 2014 to creditors totaling $81.0 billion, of which $57.1 billion were payments on account of third party claims. These amounts include the Freddie Mac settlement of $767 million in March 2014 and payments to creditors related to other claim settlements made between semi-annual distributions. In 2014, the Company has made distributions to third party creditors, including Freddie Mac, of approximately $13.6 billion.
In accordance with section 8.13(c) of the Plan, to the extent that any Debtor has Available Cash, as defined in section 1.5 of the Plan, after all Allowed Claims against that Debtor have been satisfied in full, each holder of each such Allowed Claim shall be entitled to receive post-petition interest on the Allowed amount of such Claim. The Company has not recorded an estimate for post-petition interest in LOTC as of March 31, 2014.
Note 13 Currency Translation
The Companys general ledger systems automatically translate assets and liabilities (excluding primarily Due to Affiliates and Liabilities Subject to Compromise) having non-U.S. dollar functional currencies using exchange rates as of the Balance Sheets date. The gains or losses resulting from translating non-US dollar functional currency into U.S. dollars are reflected in Stockholders Equity.
Note 14 Legal Proceedings
The Company is involved in a number of judicial, regulatory and arbitration proceedings concerning matters arising in connection with the bankruptcy proceedings and various other matters. The Company is unable at this time to determine the financial impact of such proceedings and the impact that any recoveries or liabilities may have upon the Balance Sheets. As more information becomes available, the Company may record revisions, which may be material, in future Balance Sheets.
Note 15 Financial Systems and Control Environment
Procedures, controls and resources used to create the Balance Sheets were modified, including a significant reduction in resources, in comparison to what was available to the Company prior to the Chapter 11 cases. The Company is continuously reviewing its accounts, and as a result, modifications, errors and potential misstatements might be identified. Consequently, the Company may record adjustments, which may be material, in future Balance Sheets.
Note 16 Accompanying Schedules
The amounts and estimates disclosed in the Accompanying Schedules to the Balance Sheets included in this filing are based on the information available at the time of the filing and are subject to change as additional information becomes available.
Note 17 Rounding
The Balance Sheets, the Managements Discussion and Analysis, and the Accompanying Schedules may have rounding differences in their summations. In addition, on the Balance Sheets there may be rounding differences between the financial information on the Accompanying Schedules and the related amounts.
17
LEHMAN BROTHERS HOLDINGS INC. and Other Debtors and Debtor-Controlled Entities
Balance Sheets As of March 31, 2014
(Unaudited)
($ in millions) |
Lehman Brothers Holdings Inc. 08-13555 |
Lehman Brothers Special Financing Inc. 08-13888 |
Lehman Brothers Commodity Services Inc. 08-13885 |
Lehman Brothers Commercial Corporation 08-13901 |
Lehman Brothers OTC Derivatives Inc. 08-13893 |
Lehman Brothers Financial Products Inc. 08-13902 |
Lehman Brothers Derivative Products Inc. 08-13899 |
Lehman Commercial Paper Inc. 08-13900 |
Luxembourg Residential Properties Loan Finance S.a.r.l. 09-10108 |
Other Debtors (2) |
Total Debtor Entities (1) |
Total Debtor- Controlled Entities (3) |
Total LBHI Controlled Entities |
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Assets |
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Cash and short-term investments |
$ | 6,627 | $ | 1,092 | $ | 37 | $ | 116 | $ | 0 | $ | 184 | $ | 127 | $ | 2,899 | $ | (0 | ) | $ | 31 | $ | 11,113 | $ | 1,221 | $ | 12,334 | |||||||||||||||||||||||||||||
Cash and short-term investments pledged or restricted |
5,568 | 2,580 | 159 | 422 | 899 | 29 | 31 | 373 | 2 | 141 | 10,204 | 133 | 10,338 | |||||||||||||||||||||||||||||||||||||||||||
Financial instruments and other inventory positions: |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial Real Estate |
102 | 0 | | | | | | 467 | | | 569 | 1,232 | 1,800 | |||||||||||||||||||||||||||||||||||||||||||
Loans and Residential Real Estate |
59 | 9 | | | | | | 255 | | | 324 | 126 | 449 | |||||||||||||||||||||||||||||||||||||||||||
Principal investments |
40 | | | | | | | 116 | | | 156 | 2,101 | 2,257 | |||||||||||||||||||||||||||||||||||||||||||
Derivative Receivables and Related Assets |
| 852 | 19 | 5 | 7 | 1 | | 0 | | 38 | 922 | 2 | 924 | |||||||||||||||||||||||||||||||||||||||||||
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Total Financial instruments and other inventory positions |
201 | 861 | 19 | 5 | 7 | 1 | | 838 | | 38 | 1,970 | 3,460 | 5,431 | |||||||||||||||||||||||||||||||||||||||||||
Subrogated Receivables from Affiliates and Third Parties |
2,110 | | | | | | | | | | 2,110 | | 2,110 | |||||||||||||||||||||||||||||||||||||||||||
Receivables from Controlled Affiliates and other assets |
632 | 78 | 13 | 12 | 146 | 15 | 15 | 519 | 373 | 28 | 1,830 | 700 | 2,531 | |||||||||||||||||||||||||||||||||||||||||||
Investments in Affiliates |
(35,161 | ) | (27 | ) | | | | | | 843 | | (189 | ) | (34,533 | ) | (31,660 | ) | (66,193 | ) | |||||||||||||||||||||||||||||||||||||
Due from Affiliates: |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Controlled Affiliates |
46,803 | 828 | 358 | 18 | | | 2 | 5,888 | 0 | 588 | 54,485 | 6,550 | 61,035 | |||||||||||||||||||||||||||||||||||||||||||
Non-Controlled Affiliates |
37,387 | 1,520 | 695 | 878 | 88 | 0 | 0 | 203 | | 34 | 40,805 | 4,150 | 44,955 | |||||||||||||||||||||||||||||||||||||||||||
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Total Due from Affiliates |
84,191 | 2,348 | 1,052 | 896 | 88 | 0 | 2 | 6,091 | 0 | 622 | 95,290 | 10,700 | 105,990 | |||||||||||||||||||||||||||||||||||||||||||
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Total Assets |
$ | 64,168 | $ | 6,932 | $ | 1,280 | $ | 1,451 | $ | 1,140 | $ | 230 | $ | 175 | $ | 11,563 | $ | 375 | $ | 670 | $ | 87,984 | $ | (15,445 | ) | $ | 72,539 | |||||||||||||||||||||||||||||
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Liabilities and Stockholders Equity Liabilities |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Payables to Controlled Affiliates and other liabilities |
$ | 803 | $ | 88 | $ | 1 | $ | 2 | $ | 5 | $ | | $ | 0 | $ | 485 | $ | 0 | $ | 2 | $ | 1,386 | $ | 1,418 | $ | 2,804 | ||||||||||||||||||||||||||||||
Due to Affiliates: |
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Controlled Affiliates |
0 | | | | | | | | | | 0 | 16,745 | 16,745 | |||||||||||||||||||||||||||||||||||||||||||
Non-Controlled Affiliates |
| | | | | | | | | | | 1,672 | 1,672 | |||||||||||||||||||||||||||||||||||||||||||
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Total Due to Affiliates |
0 | | | | | | | | | | 0 | 18,416 | 18,416 | |||||||||||||||||||||||||||||||||||||||||||
Secured Claims Payable to Third Parties |
2,036 | 3 | | | | | | | | | 2,039 | | 2,039 | |||||||||||||||||||||||||||||||||||||||||||
Taxes Payable |
147 | (189 | ) | (22 | ) | (6 | ) | 37 | (13 | ) | 1 | 25 | | (2 | ) | (21 | ) | 600 | 579 | |||||||||||||||||||||||||||||||||||||
Liabilities Subject to Compromise |
220,077 | 33,258 | 1,301 | 577 | 349 | 1 | 4 | 16,551 | 545 | 1,177 | 273,841 | 0 | 273,842 | |||||||||||||||||||||||||||||||||||||||||||
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Total Liabilities |
223,063 | 33,161 | 1,280 | 573 | 391 | (12 | ) | 6 | 17,061 | 546 | 1,177 | 277,245 | 20,434 | 297,679 | ||||||||||||||||||||||||||||||||||||||||||
Stockholders Equity |
(158,895 | ) | (26,229 | ) | (0 | ) | 878 | 749 | 242 | 169 | (5,498 | ) | (170 | ) | (507 | ) | (189,261 | ) | (35,879 | ) | (225,140 | ) | ||||||||||||||||||||||||||||||||||
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Total Liabilities and Stockholders Equity |
$ | 64,168 | $ | 6,932 | $ | 1,280 | $ | 1,451 | $ | 1,140 | $ | 230 | $ | 175 | $ | 11,563 | $ | 375 | $ | 670 | $ | 87,984 | $ | (15,445 | ) | $ | 72,539 | |||||||||||||||||||||||||||||
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See accompanying Notes to Balance Sheets
Note: All values that are exactly zero are shown as . Values between zero and $500,000 appear as 0.
(1) | Balances for Debtors do not reflect the impact of eliminations of intercompany balances and investments in subsidiaries. |
(2) | Certain Other Debtors Balance Sheets are presented on page 19. |
(3) | Certain Debtor-Controlled Entities Balance Sheets are presented on page 20. |
18
LEHMAN BROTHERS HOLDINGS INC. and Other Debtors and Debtor-Controlled Entities
Balance Sheets As of March 31, 2014 (Certain Other Debtors)
(Unaudited)
($ in millions) |
LB 745 LLC 08-13600 |
CES Aviation LLC 08-13905 |
CES Aviation V 08-13906 |
CES Aviation IX 08-13907 |
Structured Asset Securities Corporation 09-10558 |
East Dover Ltd 08-13908 |
Lehman Scottish Finance LP 08-13904 |
LB Rose Ranch LLC 09-10560 |
LB 2080 Kalakaua Owners LLC 09-12516 |
BNC Mortgage LLC 09-10137 |
LB Somerset LLC 09-17503 |
LB Preferred Somerset LLC 09-17505 |
PAMI Statler Arms LLC 08-13664 |
MERIT LLC 09-17331 |
Other Debtors (1) |
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Assets |
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Cash and short-term investments |
$ | 8 | $ | 4 | $ | 1 | $ | 1 | $ | 4 | $ | 0 | $ | 0 | $ | | $ | (0 | ) | $ | 2 | $ | | $ | | $ | 0 | $ | 10 | $ | 31 | |||||||||||||||||||||||||||||
Cash and short-term investments pledged or restricted |
14 | 8 | 1 | 2 | 99 | | 2 | | | 13 | | | | 2 | 141 | |||||||||||||||||||||||||||||||||||||||||||||
Financial instruments and other inventory positions: |
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Commercial Real Estate |
| | | | | | | | | | | | | | | |||||||||||||||||||||||||||||||||||||||||||||
Loans and Residential Real Estate |
| | | | | | | | | | | | | | | |||||||||||||||||||||||||||||||||||||||||||||
Principal investments |
| | | | | | | | | | | | | | | |||||||||||||||||||||||||||||||||||||||||||||
Derivative Receivables and Related Assets |
| | | | | | | | | | | | | 38 | 38 | |||||||||||||||||||||||||||||||||||||||||||||
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Total Financial instruments and other inventory positions |
| | | | | | | | | | | | | 38 | 38 | |||||||||||||||||||||||||||||||||||||||||||||
Subrogated Receivables from Affiliates and Third Parties |
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Receivables from Controlled Affiliates and other assets |
9 | 5 | 1 | 1 | 4 | 2 | | 4 | 0 | 1 | | 0 | | | 28 | |||||||||||||||||||||||||||||||||||||||||||||
Investments in Affiliates |
| | | | | | (189 | ) | | | | | | | | (189 | ) | |||||||||||||||||||||||||||||||||||||||||||
Due from Affiliates: |
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Controlled Affiliates |
143 | | 0 | 0 | 343 | | 67 | | | 2 | | | | 33 | 588 | |||||||||||||||||||||||||||||||||||||||||||||
Non-Controlled Affiliates |
5 | | | | 4 | 5 | | | | | | | | 22 | 34 | |||||||||||||||||||||||||||||||||||||||||||||
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Total Due from Affiliates |
148 | | 0 | 0 | 347 | 5 | 67 | | | 2 | | | | 54 | 622 | |||||||||||||||||||||||||||||||||||||||||||||
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Total Assets |
$ | 179 | $ | 17 | $ | 3 | $ | 5 | $ | 454 | $ | 7 | $ | (120 | ) | $ | 4 | $ | 0 | $ | 17 | $ | | $ | 0 | $ | 0 | $ | 104 | $ | 670 | |||||||||||||||||||||||||||||
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|||||||||||||||||||||||||||||||
Liabilities and Stockholders Equity Liabilities |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Payables to Controlled Affiliates and other liabilities |
$ | | $ | | $ | | $ | | $ | | $ | 1 | $ | 0 | $ | 0 | $ | 0 | $ | | $ | 0 | $ | 0 | $ | 0 | $ | 1 | $ | 2 | ||||||||||||||||||||||||||||||
Due to Affiliates: |
||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Controlled Affiliates |
| | | | | | | | | | | | | | | |||||||||||||||||||||||||||||||||||||||||||||
Non-Controlled Affiliates |
| | | | | | | | | | | | | | | |||||||||||||||||||||||||||||||||||||||||||||
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|||||||||||||||||||||||||||||||
Total Due to Affiliates |
| | | | | | | | | | | | | | | |||||||||||||||||||||||||||||||||||||||||||||
Secured Claims Payable to Third Parties |
| | | | | | | | | | | | | | | |||||||||||||||||||||||||||||||||||||||||||||
Taxes Payable |
| | | | (2 | ) | | | | | (0 | ) | | | | | (2 | ) | ||||||||||||||||||||||||||||||||||||||||||
Liabilities Subject to Compromise |
27 | 16 | 8 | 8 | 746 | 3 | | 6 | 40 | 18 | 7 | 10 | 0 | 287 | 1,177 | |||||||||||||||||||||||||||||||||||||||||||||
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|||||||||||||||||||||||||||||||
Total Liabilities |
27 | 16 | 8 | 8 | 744 | 4 | 0 | 6 | 40 | 18 | 8 | 10 | 0 | 288 | 1,177 | |||||||||||||||||||||||||||||||||||||||||||||
Stockholders Equity |
152 | 1 | (5 | ) | (3 | ) | (290 | ) | 3 | (120 | ) | (2 | ) | (40 | ) | (1 | ) | (8 | ) | (10 | ) | 0 | (184 | ) | (507 | ) | ||||||||||||||||||||||||||||||||||
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|||||||||||||||||||||||||||||||
Total Liabilities and Stockholders Equity |
$ | 179 | $ | 17 | $ | 3 | $ | 5 | $ | 454 | $ | 7 | $ | (120 | ) | $ | 4 | $ | 0 | $ | 17 | $ | | $ | 0 | $ | 0 | $ | 104 | $ | 670 | |||||||||||||||||||||||||||||
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See accompanying Notes to Balance Sheets
Note: All values that are exactly zero are shown as . Values between zero and $500,000 appear as 0.
(1) | Balances for Debtors do not reflect the impact of eliminations of intercompany balances and investments in subsidiaries. |
19
LEHMAN BROTHERS HOLDINGS INC. and Other Debtors and Debtor-Controlled Entities
Balance Sheets As of March 31, 2014 (Debtor-Controlled Entities)
(Unaudited)
($ in millions) |
Lehman ALI Inc. (2) |
Property Asset Management Inc. (3) |
LB I Group Inc. (3) |
Lehman Brothers Bancorp Inc. (3) |
PAMI Holdings LLC |
314 Common- wealth Ave Inc. (3) |
LB U.K. Holdings (Delaware) Inc. |
PAMI ALI LLC |
Lux Finance Sarl |
Other Debtor- Controlled Entities |
Debtor - Controlled Group Elims (1) |
Total Debtor- Controlled Entities |
||||||||||||||||||||||||||||||||||||
Assets |
||||||||||||||||||||||||||||||||||||||||||||||||
Cash and short-term investments |
$ | 83 | $ | 12 | $ | 29 | $ | 220 | $ | 8 | $ | 3 | $ | 15 | $ | 19 | $ | 1 | $ | 831 | $ | | $ | 1,221 | ||||||||||||||||||||||||
Cash and short-term investments pledged or restricted |
0 | 1 | 3 | 2 | 4 | 2 | | 15 | (0 | ) | 107 | | 133 | |||||||||||||||||||||||||||||||||||
Financial instruments and other inventory positions: |
||||||||||||||||||||||||||||||||||||||||||||||||
Commercial Real Estate |
84 | 514 | 0 | | 500 | (0 | ) | 6 | 51 | | 77 | | 1,232 | |||||||||||||||||||||||||||||||||||
Loans and Residential Real Estate |
124 | 0 | 0 | 1 | | | | | | 1 | | 126 | ||||||||||||||||||||||||||||||||||||
Principal investments |
1 | | 1,500 | 0 | | | 0 | 13 | | 587 | | 2,101 | ||||||||||||||||||||||||||||||||||||
Derivative Receivables and Related Assets |
| | | | | | | | | 2 | | 2 | ||||||||||||||||||||||||||||||||||||
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|||||||||||||||||||||||||
Total Financial instruments and other inventory positions |
208 | 514 | 1,500 | 1 | 500 | (0 | ) | 6 | 64 | | 666 | | 3,460 | |||||||||||||||||||||||||||||||||||
Subrogated Receivables from Affiliates and Third Parties |
| | | | | | | | | | | | ||||||||||||||||||||||||||||||||||||
Receivables from Controlled Affiliates and other assets |
355 | 9 | 80 | 2 | 2 | 98 | 95 | 76 | | 233 | (249 | ) | 700 | |||||||||||||||||||||||||||||||||||
Investments in Affiliates |
(36,083 | ) | (25 | ) | (0 | ) | (1 | ) | | (170 | ) | 118 | (224 | ) | | (122 | ) | 4,847 | (31,660 | ) | ||||||||||||||||||||||||||||
Due from Affiliates: |
||||||||||||||||||||||||||||||||||||||||||||||||
Controlled Affiliates |
4,467 | 0 | 622 | | | 708 | 284 | 769 | | 1,985 | (2,286 | ) | 6,550 | |||||||||||||||||||||||||||||||||||
Non-Controlled Affiliates |
91 | 3 | 7 | 316 | | 687 | 1,294 | 57 | 749 | 946 | | 4,150 | ||||||||||||||||||||||||||||||||||||
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Total Due from Affiliates |
4,558 | 3 | 629 | 316 | | 1,395 | 1,578 | 826 | 749 | 2,931 | (2,286 | ) | 10,700 | |||||||||||||||||||||||||||||||||||
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Total Assets |
$ | (30,878 | ) | $ | 514 | $ | 2,241 | $ | 541 | $ | 513 | $ | 1,327 | $ | 1,811 | $ | 776 | $ | 750 | $ | 4,646 | $ | 2,312 | $ | (15,445 | ) | ||||||||||||||||||||||
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Liabilities and Stockholders Equity |
||||||||||||||||||||||||||||||||||||||||||||||||
Liabilities |
||||||||||||||||||||||||||||||||||||||||||||||||
Payables to Controlled Affiliates and other liabilities |
$ | 206 | $ | 9 | $ | 407 | $ | 44 | $ | 0 | $ | (7 | ) | $ | 10 | $ | 107 | $ | | $ | 870 | $ | (228 | ) | $ | 1,418 | ||||||||||||||||||||||
Due to Affiliates: |
||||||||||||||||||||||||||||||||||||||||||||||||
Controlled Affiliates |
4,286 | | 4,133 | 72 | | 1,298 | 1,224 | 3,609 | 939 | 3,470 | (2,286 | ) | 16,745 | |||||||||||||||||||||||||||||||||||
Non-Controlled Affiliates |
19 | 0 | 38 | 14 | | 15 | 130 | 32 | | 1,424 | | 1,672 | ||||||||||||||||||||||||||||||||||||
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Total Due to Affiliates |
4,304 | 0 | 4,170 | 86 | | 1,313 | 1,354 | 3,642 | 939 | 4,893 | (2,286 | ) | 18,416 | |||||||||||||||||||||||||||||||||||
Secured Claims Payable to Third Parties |
| | | | | | | | | | | | ||||||||||||||||||||||||||||||||||||
Taxes Payable |
372 | | 5 | | | 204 | (12 | ) | 30 | | 1 | | 600 | |||||||||||||||||||||||||||||||||||
Liabilities Subject to Compromise |
| | | | | | | 0 | | 0 | | 0 | ||||||||||||||||||||||||||||||||||||
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Total Liabilities |
4,883 | 9 | 4,583 | 130 | 0 | 1,509 | 1,352 | 3,778 | 939 | 5,765 | (2,514 | ) | 20,434 | |||||||||||||||||||||||||||||||||||
Stockholders Equity |
(35,761 | ) | 506 | (2,342 | ) | 411 | 513 | (182 | ) | 459 | (3,002 | ) | (189 | ) | (1,119 | ) | 4,826 | (35,879 | ) | |||||||||||||||||||||||||||||
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|||||||||||||||||||||||||
Total Liabilities and Stockholders Equity |
$ | (30,878 | ) | $ | 514 | $ | 2,241 | $ | 541 | $ | 513 | $ | 1,327 | $ | 1,811 | $ | 776 | $ | 750 | $ | 4,646 | $ | 2,312 | $ | (15,445 | ) | ||||||||||||||||||||||
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See accompanying Notes to Balance Sheets
Note: All values that are exactly zero are shown as . Values between zero and $500,000 appear as 0.
(1) | Balances reflect the impact of eliminations of (i) intercompany balances only between Debtor-Controlled Entities and (ii) investments in subsidiaries only between Debtor-Controlled Entities. |
(2) | Lehman Ali Inc is reflected on a consolidated basis excluding wholly owned subsidiaries that are Debtor entities, 314 Commonwealth Ave Inc, and Pami ALI LLC. |
(3) | Entities are reflected on a consolidated basis, e.g. Property Asset Management Inc. includes its wholly owned subsidiary, Orbit RE LLC. |
20
Lehman Brothers Holdings Inc. and Other Debtors and Debtor-Controlled Entities
Managements Discussion & Analysis
CONTENTS
1. | Introductory Notes | 22 | ||||
2. | Highlights Section 15.6(b)(ii)(A) | 23 | ||||
2.1. Trends and Uncertainties |
||||||
2.2. Significant Events, Developments and Other Activities |
||||||
3. | Investments and Expenditures Section 15.6(b)(ii)(B) | 26 | ||||
4. | Asset Sales, Restructurings and Other Section 15.6(b)(ii)(C) | 27 | ||||
5. | Claims Update Section 15.6(b)(ii)(D) | 29 | ||||
5.1. Claims Reconciliation and Resolution Update |
||||||
5.2. Significant Claims Settlements |
||||||
6. | Litigation Update Section 15.6(b)(ii)(E) | 31 | ||||
7. | Costs and Expenses Section 15.6(b)(ii)(F) | 33 | ||||
8. | Appendix A Glossary of Terms | 34 |
Section references above are to the Plan.
21
1. | INTRODUCTORY NOTES |
This report contains forward-looking statements that reflect known and unknown risks, uncertainties and other factors which may cause the Companys actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by these forward-looking statements. All statements other than statements of historical fact are statements that could be deemed forward-looking statements, including all statements containing information regarding the intent, belief or current expectation of the Company and members of its management. Forward-looking statements reflect the Companys current views with respect to future events as well as various estimates, assumptions and comparisons based on available information, many of which are subject to risks and uncertainties. Readers of this report should not place undue reliance on these forward-looking statements.
The reader should read this report and the documents referenced herein (in particular, the accompanying Balance Sheets and Accompanying Schedules, and the 2013+ Cash Flow Estimates) completely and with the understanding that as more information becomes available to the Company, any forward-looking statements may change, potentially in a material respect. The Company does not undertake any obligation to update any forward-looking statements contained in this report, but reserves the right to do so.
In addition, material uncertainties continue to exist regarding the ultimate value realizable from the Companys assets, the timing of asset recoveries, future costs, and the eventual level of creditors allowed claims. These may have a significant effect on the timing and quantum of any future distributions to creditors. Accordingly, creditors should not rely upon this report as the sole basis of an estimate of the value of their claims, or as a complete description of the Company, its business, condition (financial or otherwise), results of operations, prospects, assets or liabilities.
This report refers to various defined terms as set out in the Glossary of Terms in Appendix A.
Objectives
On March 6, 2012 (the Effective Date), the Plan became effective and the Debtors emerged from bankruptcy with new Boards of Directors (LBHIs Board of Directors hereinafter referred to as the Board). The Company continues to pursue the objective of asset value maximization and timely distributions to creditors of available cash through the optimal execution of an orderly wind down process and the judicious and timely resolution of claims. Pursuant to the Plan, the Company has made and expects to continue to make semi-annual distributions to creditors of all Debtors, with each entity subject to review at each distribution date.
22
2. | HIGHLIGHTS Section 15.6(b)(ii)(A) |
2.1 | TRENDS AND UNCERTAINTIES |
The Company owns real estate, private equity investments, loans, derivatives contracts, and other assets in a wide variety of local, domestic and global markets, and as such, in future periods the values of these assets are subject to trends, events and factors beyond the Companys control, including but not limited to: the local, domestic and global economic environment; changes in budget, tax and fiscal policies in the U.S. and other countries; fluctuations in debt and equity markets, interest rates, and currency exchange rates; litigation risk; and changes in regulatory requirements.
The 2013+ Cash Flow Estimates and its accompanying notes (Docket No. 38954) reflect the Companys views on trends and uncertainties that have, or are reasonably likely to have, a material effect on the Companys financial condition as of such date. Except as noted therein, the Company is not aware of any additional trends, events or uncertainties that will materially change the information contained in this report.
2.2 | SIGNIFICANT EVENTS, DEVELOPMENTS AND OTHER ACTIVITIES |
This section provides an update on various significant distribution, asset management and monetization, claim, affiliate and other activities:
For the quarter ended March 31, 2014:
| The Company realized gross cash receipts of approximately $5.5 billion in the quarter ending March 31, 2014, including: |
| Receipts from asset management and monetization activities of approximately $1.9 billion, including: |
| Collections of approximately $1.4 billion from Commercial Real Estate investments, including $1.0 billion from the sale and dividends of the common shares of EQR and AVB, $122 million from the sale of the Ritz Kapalua Hotel and $87 million from the sale of Culver Studios; |
| Approximately $260 million of collections from Derivatives activities. |
| Receipt of approximately $3.2 billion from Non-Controlled Affiliates, including $1,370 million from Lehman Brothers Asia Holdings Ltd., $1,066 million from LBF and $353 million from Lehman Brothers Commercial Corp Asia (LBCCA). |
23
For the period subsequent to March 31, 2014:
| During April and May 2014, the Company collected gross cash receipts of approximately $1.8 billion: |
| Receipts from asset management activities of approximately $820 million, primarily on collections of approximately $560 million from Commercial Real Estate investments including $210 million from the sale of Marblehead land, $84 million from the sale of New Day (portfolio of European Hotels) debt and equity positions and $75 million from the sale of Oak Knoll land; |
| Receipts by LBHI from Debtors of approximately $440 million on distributions from LOTC ($316 million), LBCC ($114 million) and LBSF ($10 million) pursuant to claims assigned to LBHI as part of the LBF Settlement Agreement (refer to Docket No. 36300); |
| Receipts from Non-Controlled Affiliates of approximately $540 million including approximately $396 million withheld by LBHI on allowed claims against LBT and LBS. To accelerate receipts, LBHI entered into separate Distribution Agreements, pursuant to which LBHI deducted and withheld distributions due to LBT and LBS on their allowed claims against LBHI. |
Other Activities:
| Claims and Distributions: |
| Unresolved filed claims decreased by approximately $44 billion to $80.0 billion as of March 31, 2014, from $123.9 billion as of December 31, 2013, primarily due to the settlement of claims with FNMA, Freddie Mac and LBF. As of March 31, 2014, the Company has estimated the liability for claims that have yet to be allowed or disallowed to be approximately $26.1 billion, which represents a decrease of approximately $5.5 billion from $31.6 billion at December 31, 2013, primarily due to the settlement of claims with FNMA, Freddie Mac and LBF. See Schedule 5.1 Claims Reconciliation and Resolution Update for further details; |
| The Company made distributions to third party creditors, including Freddie Mac of approximately $13.6 billion. Please see Docket No. 43745 for further information. |
| Non-Controlled Affiliates: |
| On January 31, 2014, Lehman Brothers Holdings Intermediate 2 Ltd. (LBHI2), LBHI, Elliott Management Corporation (Elliott) and King Street Capital Management, L.P. (KS), KS together with Elliott, the Funds) entered into definitive documentation and consummated the Joint Venture previously announced on November 21, 2013. LBHI2 contributed to the Joint Venture its senior and subordinated claims (approximately face amount GBP 1.3 billion) and a portion of the economic interest in the preferred equity in LBIE. The Funds paid approximately GBP 650 million to LBHI2 and contributed to the Joint Venture the distributions on their claims against LBIE (approximately GBP 2.6 billion as of January 31, 2014) in excess of the principal amount plus post-administration interest at 8% per year. The |
24
Joint Venture includes a joint recovery pool which is governed by a specific sharing formula. A detailed summary of the terms of the parties commitments and the Joint Venture is available at www.lehman-docket.com in the Key Documents section. |
| Other: |
| A settlement agreement between LBHI and Federal National Mortgage Association (FNMA) was approved by the Bankruptcy Court on January 31, 2014. The agreement provides FNMA an allowed Class 7 claim of $2.15 billion and transfers certain documents from FNMA to LBHI in order to allow LBHI to pursue indemnity claims against various third parties for breach of representations and warranties. FNMA also released all other claims against LBHI, other Debtors and Debtor controlled entities; |
| Federal Home Loan Mortgage Corporation (Freddie Mac) and LBHI reached a settlement agreement which was approved by the Bankruptcy Court on February 19, 2014. As a result of the agreement, LBHI made a one-time cash payment of $767 million to Freddie Mac. LBHI reinstated, for purposes of parity classes, two Freddie Mac Claims to itself amounting to $1.8 billion. |
25
3. | INVESTMENTS AND EXPENDITURES Section 15.6(b)(ii)(B) |
The following schedule denotes new investments in any asset or permitted expenditures in the period between January 1, 2014 and March 31, 2014 to preserve existing assets (in each case a single transaction or series of related transactions on a cumulative basis after the Effective Date in excess of $25 million):
During the quarter ending March 31, 2014, there was no investment or expenditure for an individual asset greater than $25 million.
26
4. | ASSET SALES, RESTRUCTURINGS AND OTHER Section 15.6(b)(ii)(C)(1) |
The following schedule denotes any restructurings, settlements and sales, including any realized gains or losses relative to the market value reported in the prior period balance sheet, and relative to undiscounted cash flow estimates as reported in the 2013+ Cash Flow Estimates for principal amounts, wind-downs or liquidations of the Debtors existing assets, in each case, solely with respect to any asset that has an estimated undiscounted cash flow principal amount greater than $50 million for derivatives, loans, or private equity or principal investments managed assets, and greater than $75 million for real estate managed assets. The aforementioned are referred to as Significant Monetizations:
($ millions) | Actual Principal Collected (2) |
2013+ Cash Flow Estimates (3) |
12/31/2013 Balance Sheets Value (4) |
Realized Gain / (Loss) Relative to 2013+ Cash Flow Estimate |
Realized Gain / (Loss) Relative to 12/31/13 Balance Sheets Value |
|||||||||||||||
Loans and Securitizations (5) |
||||||||||||||||||||
Fairpoint Communications Inc. |
$ | 21 | $ | 12 | $ | 17 | $ | 9 | $ | 4 | ||||||||||
Deal A |
9 | 6 | 7 | 2 | 2 | |||||||||||||||
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Total Loans and Securitizations |
$ | 30 | $ | 19 | $ | 24 | $ | 11 | $ | 6 | ||||||||||
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Private Equity / Principal Investments |
||||||||||||||||||||
GP and LP Stakes in PE and Hedge Funds |
$ | 43 | $ | 43 | $ | 43 | $ | | $ | 0 | ||||||||||
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|||||||||||
Total Private Equity / Principal Investments |
$ | 43 | $ | 43 | $ | 43 | $ | | $ | 0 | ||||||||||
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Derivatives (5) |
||||||||||||||||||||
Deal B |
$ | 86 | $ | 79 | $ | 84 | $ | 7 | $ | 2 | ||||||||||
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|||||||||||
Total Derivatives |
$ | 86 | $ | 79 | $ | 84 | $ | 7 | $ | 2 | ||||||||||
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Real Estate (5) |
||||||||||||||||||||
Deal C |
$ | 23 | $ | 23 | $ | 23 | $ | | $ | (0 | ) | |||||||||
Archstone (Sales and Dividend) |
1,021 | 1,082 | 963 | (61 | ) | 58 | ||||||||||||||
Culver Studios |
87 | 76 | 81 | 11 | 6 | |||||||||||||||
Ritz Kapalua Hotel |
122 | 179 | 119 | (57 | ) | 3 | ||||||||||||||
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Total Real Estate |
$ | 1,253 | $ | 1,359 | $ | 1,186 | $ | (106 | ) | $ | 67 | |||||||||
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|||||||||||
Total Significant Monetizations |
$ | 1,411 | $ | 1,500 | $ | 1,337 | $ | (89 | ) | $ | 75 | |||||||||
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27
Notes to Asset Sales, Restructurings and Other:
1. | All values that are exactly zero are shown as -. Values between zero and $0.5 million appear as 0. Totals may not foot due to rounding. |
2. | Partial monetizations below $5 million are not reflected above. Some transactions have not settled and are recorded as Receivables from Controlled Affiliates and other assets on the Balance Sheets. |
3. | Represents undiscounted cash flow of the estimated principal (and related accrued income, if any) amount reflected in the 2013+ Cash Flow Estimates for the asset. |
4. | Represents the recorded value reported on the prior period balance sheet (as of December 31, 2013) for the asset. |
5. | Certain monetizations are anonymous due to confidentiality requirements. |
28
5. | CLAIMS UPDATE Section 15.6(b)(ii)(D) (1) |
5.1 | CLAIMS RECONCILIATION AND RESOLUTION UPDATE |
The following schedule is an update of the claims reconciliation and resolution process:
($ billions) | First Quarter Activity | March 31, 2014 Claims Balance | ||||||||||||||||||||||||||||||
Claim Category |
December 31, 2013 Claims Balance |
Additional Allowed Claims |
Change in Estimated Active Claims |
March 31, 2014 Claims Balance |
LBHI | LCPI | LBSF | Other Debtors |
||||||||||||||||||||||||
Direct Claims: |
||||||||||||||||||||||||||||||||
Debt |
$ | 99.7 | $ | 1.2 | $ | (1.2 | ) | $ | 99.7 | $ | 99.0 | $ | | $ | | $ | 0.7 | |||||||||||||||
Derivatives |
25.8 | 0.2 | (0.2 | ) | 25.8 | 0.0 | 0.0 | 23.2 | 2.5 | |||||||||||||||||||||||
Other |
15.9 | 2.8 | (3.2 | ) | 15.5 | 8.3 | 6.7 | 0.1 | 0.4 | |||||||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Total Direct Claims |
141.4 | 4.2 | (4.6 | ) | 141.0 | 107.3 | 6.8 | 23.3 | 3.7 | |||||||||||||||||||||||
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|
|
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|
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|
|
|
|
|
|
|||||||||||||||||
Affiliate Claims Direct |
107.5 | 0.5 | (0.4 | ) | 107.6 | 58.8 | 23.1 | 20.6 | 5.1 | |||||||||||||||||||||||
Affiliate Guarantee Claims |
11.8 | 0.9 | 0.0 | 12.7 | 12.7 | | | | ||||||||||||||||||||||||
Third Party Guarantee Claims (2) |
77.8 | 0.4 | (0.3 | ) | 77.9 | 77.9 | | | | |||||||||||||||||||||||
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|
|
|
|
|
|||||||||||||||||
Total Liabilities Subject to Compromise |
338.5 | 6.0 | (5.3 | ) | 339.2 | 256.7 | 29.8 | 43.9 | 8.8 | |||||||||||||||||||||||
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|
|
|
|
|||||||||||||||||
Taxes Payable |
0.3 | 0.0 | (0.3 | ) | (0.0 | ) | 0.1 | 0.0 | (0.2 | ) | (0.0 | ) | ||||||||||||||||||||
Secured Claims Payable to Third parties |
2.0 | | | 2.0 | 2.0 | | 0.0 | 0.0 | ||||||||||||||||||||||||
|
|
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|
|
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|
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|
|
|
|||||||||||||||||
Total Claims (2) |
$ | 340.8 | $ | 6.0 | $ | (5.6 | ) | $ | 341.2 | $ | 258.9 | $ | 29.9 | $ | 43.7 | $ | 8.8 | |||||||||||||||
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|
|
|
|
|
|||||||||||||||||
Allowed Claims (3) |
$ | 309.2 | $ | 6.0 | $ | | $ | 315.1 | $ | 237.4 | $ | 29.8 | $ | 39.7 | $ | 8.2 | ||||||||||||||||
Estimated Unresolved Claims to be Allowed (2)(4) |
31.6 | | (5.6 | ) | 26.1 | 21.5 | 0.0 | 4.0 | 0.6 | |||||||||||||||||||||||
|
|
|
|
|
|
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|
|
|
|
|
|
|
|
|||||||||||||||||
Total Claims |
$ | 340.8 | $ | 6.0 | $ | (5.6 | ) | $ | 341.2 | $ | 258.9 | $ | 29.9 | $ | 43.7 | $ | 8.8 | |||||||||||||||
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|
|
|
|
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|
|
|
|
|
|
|
|
|
|
|||||||||||||||||
Less: Claims Distributions and other reductions (5) |
(65.3 | ) | (36.6 | ) | (13.3 | ) | (10.6 | ) | (4.8 | ) | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
Net Claim Liability at March 31, 2014 |
$ | 275.9 | $ | 222.3 | $ | 16.6 | $ | 33.1 | $ | 3.9 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
|
|
(1) | All values that are exactly zero are shown as -. Values between zero and $50 million appear as 0. Totals may not foot due to rounding. |
(2) | Included in the current estimate of Liabilities Subject to Compromise is approximately $6.9 billion of LBHI Guarantees to creditors of LBIE. |
(3) | Payments on certain secured claims of LBSF are reflected as a reduction of Allowed Claims on both LBSF and LCPI. |
(4) | As of March 31, 2014, there are unresolved filed claims of $80 billion expected to be allowed at the estimated amount of approximately $26.1 billion. |
(5) | Claims Distributions and other reductions include (i) distributions on allowed claims, (ii) reductions of the liabilities related to certain satisfied claims and (iii) the assignment of affiliate claims to their respective parents. |
29
5.2 | SIGNIFICANT CLAIMS SETTLEMENTS |
The following schedule is a description of the claim settlements for the quarter ended March 31, 2014 providing for the allowance in excess of $250 million of a Disputed Claim against the Debtors:
Debtor |
Claim Number | Original Creditor |
Claim Category |
Filed Amount |
Allowed Amount (1) |
|||||||||
LBHI | 29557 | Federal National Mortgage Association | Other Direct | $ | 18,937,830,300 | $ | 2,150,000,000 | |||||||
LBHI | 33576 | Federal Home Loan Mortgage Corporation (2) | Other Direct | 868,600,000 | 632,000,000 | |||||||||
LBHI | 33568 | Federal Home Loan Mortgage Corporation (2) | Debt | 1,202,241,875 | 1,202,241,875 | |||||||||
LBHI | 62783 | LBIE (LBF-LPS transactions) | Affiliates Guarantee | 575,154,701 | 262,221,458 | |||||||||
LBHI | 62786 | LBIE (LBF-LPS transactions) | Affiliates Guarantee | 448,053,161 | 516,013,936 | |||||||||
LOTC | 67796 | PricewaterhouseCoopers AG, Zurich (LBF) | Affiliates | 386,290,348 | 316,063,254 | |||||||||
|
|
|
|
|||||||||||
Total |
$ | 22,418,170,385 | $ | 5,078,540,523 | ||||||||||
|
|
|
|
1) During the quarter ended March 2014 there were approximately $6.0 billion in claims allowed, of which those greater than $250 million are listed above.
2) As part of the Freddie Mac settlement, LBHI reinstated for purposes of parity classes, two Freddie Mac Claims to itself amounting to $1.8 billion.
30
6. | LITIGATION UPDATE Section 15.6(b)(ii)(E) |
The following is a description of the Companys significant affirmative litigation actions against third parties that are pending, including the damages sought by the Company:
Previous litigation actions with significant updates during the quarter:
SPV Avoidance Actions On January 29, 2014, the Court extended the stay of the avoidance actions until the later of May 20, 2014, or 30 days after the court enters a scheduling order and ordered LBSF to file a scheduling order, after meeting and conferring with counsel for the defendant noteholders, that will control the process of the litigation after expiration of the stay. The first draft of the scheduling order was filed with the Court on February 19, 2014. (Refer to the filed Balance Sheets as of March 31, 2012 for previous disclosure).
Ballyrock Litigation During 2014, the Company signed a settlement agreement with one of the defendants. The litigation remains pending with respect to other defendants. (Refer to the filed Balance Sheets as of March 31, 2012 for previous disclosure).
LMA Avoidance Actions Litigation LCPI has reached a settlement with Sark (Adv. Pro. No. 11-01697) on March 14, 2014, and LCPI voluntarily dismissed its claims in the adversary proceeding against Sark. To facilitate ongoing settlement discussions between LCPI and the remaining four counterparties, LCPI has stipulated to extend each counter-parties deadline to file its answer. (Refer to the filed Balance Sheets as of December 31, 2012 for previous disclosure).
Intel Litigation On December 19, 2013 the Bankruptcy Court granted Intels Motion to Dismiss Counts 2 and 3 of the Adversary Complaint, and declared Count 1 of the Adversary Complaint to be a non-core claim. The Court also proposed that the parties agree to an adjudication of the matter in the Bankruptcy Court notwithstanding the granting of the motion. On January 14, 2014, Intel moved before the District Court to withdraw the reference from the Bankruptcy Court. By Order dated May 10, 2014, the District Court denied Intels motion to withdraw the reference, and ordered that the case proceed in the Bankruptcy Court, with leave for Intel to renew its motion if the case proceeds to trial. (Refer to the filed Balance Sheets as of March 31, 2013 for previous disclosure).
Federal Tax Litigation - In 2010, LBHI filed an action against the United States of America in U.S. District Court for $180 million refund of taxes paid related to certain 1990-2000 stock loan activities which were part of the Companys customer and proprietary equity business. This activity relates to foreign tax credits emanating from customer and proprietary stock lending business conducted in 1997 to 2000 between LBI and LBIE. This litigation also includes additional tax liabilities for 2001 to 2004 as it relates to the Companys dispute over IRS audit adjustments for LBI and LBIE stock loan transactions. On February 27, 2014 and May 5, 2014, the Bankruptcy Court and the Congressional Joint Committee on Taxation (JCT), respectively, approved a settlement framework negotiated by LBHI with the U.S. Department of Justice. The framework provides for an abbreviated trial (confining the trial to one legal interpretational issue) and no penalty, but limits the amount refundable. The trial is anticipated to occur in the fourth quarter of 2014. (Refer to the filed Balance Sheets as of September 30, 2013 for previous disclosure).
31
Giants Stadium On May 8, 2014, LBSF filed its claim objection to Giants Stadiums claims in the bankruptcy proceeding. (Refer to the filed Balance Sheets as of September 30, 2013 for previous disclosure).
Previous litigation actions with no significant updates during the quarter:
LBHI v. JPMorgan Chase Bank, N.A. - (Refer to the filed Balance Sheets as of September 30, 2012 for previous disclosure).
Republic of Italy - (Refer to the filed Balance Sheets as of September 30, 2012 for previous disclosure).
Credit Suisse Group AG - (Refer to the filed Balance Sheets as of September 30, 2013 for previous disclosure).
Massachusetts Department of Transportation (MDOT) - (Refer to the filed Balance Sheets as of December 31, 2013 for previous disclosure).
LCOR Alexandria LLC and PTO Holdings LLC (Defendants) - (Refer to the filed Balance Sheets as of December 31, 2013 for previous disclosure).
AmeriCredit - (Refer to the filed Balance Sheets as of December 31, 2013 for previous disclosure).
Michigan State Housing Development Authority Litigation - (Refer to the filed Balance Sheets as of December 31, 2013 for previous disclosure).
Fontainebleau Litigation - (Refer to the filed Balance Sheets as of December 31, 2013 for previous disclosure).
Citigroup Litigation - (Refer to the filed Balance Sheets as of December 31, 2013 for previous disclosure).
Marubeni Litigation - (Refer to the filed Balance Sheets as of December 31, 2013 for previous disclosure).
Turnberry Litigation - (Refer to the filed Balance Sheets as of December 31, 2013 for previous disclosure).
32
7. | COSTS AND EXPENSES- Section 15.6(b)(ii)(F) |
The Company reports material costs and expenses on a cash basis in the monthly Post-Effective Operating Reports. Many of the engaged professionals send invoices to the Company two or more months after the dates on which the services are rendered. The cash disbursements for the Companys material costs and expenses paid through March 31, 2014 are shown below.
($ millions) | Quarter Ended March 2014 |
2013+ CFE 2014 Full Year Estimate |
||||||
Professional Fees (1) |
$ | 37 | $ | 172 | ||||
Compensation and Benefits (2) |
84 | 140 | ||||||
Outsourced Services & IT Activities |
10 | 35 | ||||||
Other Operating Disbursements |
6 | 22 | ||||||
|
|
|
|
|||||
Total Costs & Expenses |
$ | 137 | $ | 368 | ||||
|
|
|
|
Notes:
1. | For additional information, please refer to the Monthly Schedule of Professional Fees filed with the Bankruptcy Court. |
2. | Compensation and Benefits include amounts paid in January 2014 to certain employees for bonuses for 2013, as well as amounts paid to Alvarez & Marsal as interim management. |
33
APPENDIX A GLOSSARY OF TERMS
TERM
|
DEFINITION
| |
2013+ Cash Flow Estimates, also 2013+ CFE
|
The Companys updated outlook of estimated receipts and disbursements in a report filed on July 23, 2013 (Docket No. 38954)
| |
Archstone |
Archstone Enterprise LP n/k/a Jupiter Enterprise LP
| |
AVB |
AvalonBay Communities, Inc.
| |
Bankruptcy Court |
The United States Bankruptcy Court for the Southern District of New York
| |
Company |
Lehman Brothers Holdings Inc. and entities that are directly or indirectly controlled by LBHI as Plan Administrator, including its management and board of directors; excludes, among others, those entities that are under separate administrations in the United States or abroad
| |
Debtors |
LBHI and certain of its direct and indirect subsidiaries that filed for protection under Chapter 11 of the Bankruptcy Code
| |
Disclosure Statement |
The Disclosure Statement for the Third Amended Joint Chapter 11 Plan, filed August 31, 2011
| |
EQR |
Equity Residential
| |
LBCC |
Lehman Brothers Commercial Corp.
| |
LBDP |
Lehman Brothers Derivatives Products Inc.
| |
LBF |
Lehman Brothers Finance S.A.
| |
LBHI |
Lehman Brothers Holdings Inc.
| |
LBI |
Lehman Brothers Inc.
| |
LBIE |
Lehman Brothers International (Europe)
| |
LCPI |
Lehman Commercial Paper Inc.
| |
LOTC |
Lehman Brothers OTC Derivatives Inc.
| |
LBS |
Lehman Brothers Securities N.V.
| |
LBT |
Lehman Brothers Treasury Co. B.V.
| |
Non-Controlled Affiliates |
Affiliates of the Debtors that were not managed or controlled by a Debtor as of the Effective Date, including, without limitation, all affiliates that are subject to proceedings in the U.S. or abroad, including proceedings under the Securities Investor Protection Act.
| |
MD&A |
Managements Discussion & Analysis
| |
Plan |
The Modified Third Amended Joint Chapter 11 Plan of Lehman Brothers Holdings Inc. and its Affiliated Debtors, dated December 5, 2011 and confirmed December 6, 2011
|
34
LEHMAN BROTHERS HOLDINGS INC. and Other Debtors and Debtor-Controlled Entities
Financial Instruments Summary and Activity (1)
January 1, 2014 - March 31, 2014
(Unaudited)
As of March 31, 2014 | (Activity 01/01/14- 03/31/14) | |||||||||||||||||||||||||||||||||||
Encumbered (2) |
Unencumbered |
Total |
As
Reported |
Change |
Transfers and |
Fair Value / |
Cash (5) | |||||||||||||||||||||||||||||
$ in millions | (Receipts) | Disbursements | ||||||||||||||||||||||||||||||||||
Commercial Real Estate (CRE) |
||||||||||||||||||||||||||||||||||||
Debtors: |
||||||||||||||||||||||||||||||||||||
Lehman Brothers Holdings Inc. |
$ | | $ | 102 | $ | 102 | $ | 104 | $ | (2 | ) | $ | | $ | 4 | $ | (5 | ) | $ | 0 | ||||||||||||||||
Lehman Commercial Paper Inc. |
| 467 | 467 | 805 | (338 | ) | (4 | ) | 76 | (412 | ) | 1 | ||||||||||||||||||||||||
Luxembourg Residential Properties Loan Finance S.a.r.l. |
| | | 179 | (179 | ) | | 16 | (195 | ) | | |||||||||||||||||||||||||
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|
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|
|
|||||||||||||||||||
Subtotal Debtors |
| 569 | 569 | 1,088 | (520 | ) | (4 | ) | 96 | (612 | ) | 2 | ||||||||||||||||||||||||
Debtor-Controlled |
| 1,232 | 1,232 | 1,906 | (674 | ) | 4 | 101 | (821 | ) | 40 | |||||||||||||||||||||||||
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|
|
|
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|
|
|
|
|
|
|
|
|||||||||||||||||||
Total Commercial Real Estate |
| 1,801 | 1,801 | 2,994 | (1,194 | ) | | 197 | (1,433 | ) | 41 | |||||||||||||||||||||||||
|
|
|
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|
|
|
|
|||||||||||||||||||
Loans and Residential Real Estate (Loans and RESI) |
||||||||||||||||||||||||||||||||||||
Debtors: |
||||||||||||||||||||||||||||||||||||
Lehman Brothers Holdings Inc. |
| 59 | 59 | 92 | (33 | ) | (17 | ) | 11 | (27 | ) | 0 | ||||||||||||||||||||||||
Lehman Brothers Special Financing Inc. |
| 9 | 9 | 8 | 1 | | 1 | | | |||||||||||||||||||||||||||
Lehman Commercial Paper Inc. |
| 255 | 255 | 300 | (45 | ) | (61 | ) | 46 | (32 | ) | 2 | ||||||||||||||||||||||||
|
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|
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|
|
|
|
|
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|
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|
|
|
|
|
|||||||||||||||||||
Subtotal Debtors |
| 324 | 324 | 401 | (77 | ) | (78 | ) | 59 | (59 | ) | 2 | ||||||||||||||||||||||||
Debtor-Controlled |
0 | 126 | 126 | 77 | 48 | 61 | 24 | (37 | ) | | ||||||||||||||||||||||||||
|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Total Loans and Residential Real Estate |
0 | 449 | 449 | 478 | (29 | ) | (17 | ) | 83 | (96 | ) | 2 | ||||||||||||||||||||||||
|
|
|
|
|
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|
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|
|
|
|
|||||||||||||||||||
Private Equity / Principal Investments (PEPI) |
||||||||||||||||||||||||||||||||||||
Debtors: |
||||||||||||||||||||||||||||||||||||
Lehman Brothers Holdings Inc. |
| 40 | 40 | 33 | 6 | | 7 | (1 | ) | 0 | ||||||||||||||||||||||||||
Lehman Commercial Paper Inc. |
| 116 | 116 | 127 | (11 | ) | | 3 | (14 | ) | | |||||||||||||||||||||||||
|
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|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Subtotal Debtors |
| 156 | 156 | 161 | (5 | ) | | 10 | (15 | ) | 0 | |||||||||||||||||||||||||
Debtor-Controlled |
400 | 1,701 | 2,101 | 2,025 | 76 | 86 | 72 | (82 | ) | 1 | ||||||||||||||||||||||||||
|
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|
|
|||||||||||||||||||
Total Private Equity / Principal Investments |
400 | 1,857 | 2,257 | 2,186 | 71 | 86 | 81 | (97 | ) | 1 | ||||||||||||||||||||||||||
|
|
|
|
|
|
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|
|
|
|
|
|
|
|||||||||||||||||||
Derivative Receivables and Related Assets (Derivatives) |
||||||||||||||||||||||||||||||||||||
Debtors: |
||||||||||||||||||||||||||||||||||||
Lehman Brothers Special Financing Inc. |
3 | 849 | 852 | 929 | (77 | ) | | 99 | (176 | ) | | |||||||||||||||||||||||||
Lehman Brothers Commodity Services Inc. |
| 19 | 19 | 18 | 1 | | 1 | (0 | ) | | ||||||||||||||||||||||||||
Lehman Brothers OTC Derivatives Inc. |
| 7 | 7 | 80 | (72 | ) | | 2 | (75 | ) | | |||||||||||||||||||||||||
Lehman Brothers Commercial Corp. |
| 5 | 5 | 5 | (0 | ) | | 6 | (6 | ) | | |||||||||||||||||||||||||
Other Debtors |
| 40 | 40 | 40 | 0 | | 2 | (2 | ) | | ||||||||||||||||||||||||||
|
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|
|
|
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|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Subtotal Debtors |
3 | 919 | 922 | 1,071 | (148 | ) | | 110 | (258 | ) | | |||||||||||||||||||||||||
Debtor-Controlled |
| 2 | 2 | 1 | 1 | | 1 | | | |||||||||||||||||||||||||||
|
|
|
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|
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|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Total Derivative Receivables and Related Assets |
3 | 921 | 924 | 1,072 | (148 | ) | | 111 | (258 | ) | | |||||||||||||||||||||||||
|
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|
|
|||||||||||||||||||
Totals |
$ | 403 | $ | 5,028 | $ | 5,431 | $ | 6,730 | $ | (1,299 | ) | $ | 69 | $ | 472 | $ | (1,885 | ) | $ | 44 | ||||||||||||||||
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|
|||||||||||||||||||
Notes:
All values that are exactly zero are shown as . Values between zero and $500,000 appear as 0. Refer to the accompanying Notes to the Balance Sheets for further discussion.
(1) | This schedule reflects inventory activity between the December 31, 2013 and March 31, 2014 Balance Sheets. |
(2) | Encumbered assets include: (i) $400 million in PEPI encumbered to LCPI and (ii) $3 million in Derivatives encumbered to collateralized lenders. |
(3) | Transfers and Reclassifications include (i) reclasses of certain inventory positions on the Balance Sheets and (ii) $61 million loan position transferred from LCPI to Long Cedar Plank LLC, a Debtor-Controlled Entity. |
(4) | Amounts reflected in the Fair Value / Recovery Value Change column represent adjustments for the Companys judgment as to fair value/recovery value and include the changes in valuation on assets encumbered to another legal entity which has the economic interest. |
(5) | CRE was valued as of December 31, 2013 adjusted for (i) cash activity from January 1, 2014 to March 31, 2014 and (ii) market values for certain positions to reflect either an agreed-upon sale contract in place or significant negotiations that established a range of values. Cash receipts and disbursements in Derivatives include collections on open and terminated trades, net of hedging activities. (Amounts may differ from previously filed Schedule of Cash Receipts and Disbursements mainly due to unsettled transactions and timing and classification differences.) |
35
LEHMAN BROTHERS HOLDINGS INC. and Other Debtors and Debtor-Controlled Entities
Commercial Real Estate - by Product Type (1)
As of March 31, 2014
(Unaudited)
$ in millions |
Lehman Brothers Holdings Inc. |
Lehman Commercial Paper Inc. |
Total Debtor Entities |
Property Asset Management Inc. |
PAMI Holdings LLC |
Other Debtor- Controlled Entities |
Total LBHI Controlled Entities |
Cost and Unpaid Principal Balances (3) |
||||||||||||||||||||||||||
Commercial Real Estate |
||||||||||||||||||||||||||||||||||
North America |
||||||||||||||||||||||||||||||||||
Whole loans |
||||||||||||||||||||||||||||||||||
Senior |
$ | | $ | 76 | $ | 76 | $ | 3 | $ | 9 | $ | 28 | $ | 116 | $ | 200 | ||||||||||||||||||
B-notes/Mezzanine |
1 | 3 | 4 | | | 3 | 6 | 64 | ||||||||||||||||||||||||||
Equity (2) |
| 1 | 1 | 219 | 132 | 23 | 375 | 831 | ||||||||||||||||||||||||||
Real Estate Owned |
| 145 | 145 | 292 | 359 | 101 | 897 | 2,183 | ||||||||||||||||||||||||||
Other |
7 | 6 | 13 | 1 | | 4 | 17 | 62 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Subtotal |
8 | 230 | 238 | 514 | 501 | 158 | 1,411 | 3,341 | ||||||||||||||||||||||||||
Europe |
||||||||||||||||||||||||||||||||||
Whole loans |
||||||||||||||||||||||||||||||||||
Senior |
| 8 | 8 | | | | 8 | 21 | ||||||||||||||||||||||||||
B-notes/Mezzanine |
80 | 192 | 272 | | | | 272 | 400 | ||||||||||||||||||||||||||
Equity |
| 36 | 36 | | | 40 | 76 | 345 | ||||||||||||||||||||||||||
Other |
14 | | 14 | | | | 14 | 2 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Subtotal |
94 | 236 | 330 | | | 40 | 370 | 768 | ||||||||||||||||||||||||||
Asia |
||||||||||||||||||||||||||||||||||
Whole loans |
||||||||||||||||||||||||||||||||||
Senior |
| | | | | 10 | 10 | 52 | ||||||||||||||||||||||||||
Equity |
| | | | | 9 | 9 | 23 | ||||||||||||||||||||||||||
Other |
| | | | | 1 | 1 | 0 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Subtotal |
| | | | | 20 | 20 | 75 | ||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Total Commercial Real Estate |
$ | 102 | $ | 467 | $ | 569 | $ | 514 | $ | 501 | $ | 218 | $ | 1,801 | $ | 4,184 | ||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||
Notes:
(1) | Refer to the accompanying Notes to the Balance Sheets for further discussion on valuation and additional disclosures. |
(2) | During the months of January and February 2014, the Company sold all its remaining REIT Shares for total proceeds of approximately $1.0 billion. The proceeds, net of certain reserves, were subsequently used to pay down the Preferred Equity of Jupiter held by various Debtor-Controlled Entities and provided a common equity distribution to PAMI, ACQ SPV I Paper LLC, ACQ SPV II Paper LLC and third party owners. |
(3) | Cost information primarily includes: (i) for whole loans and corporate loans, the remaining outstanding principal balance; (ii) for equity, the total acquisition amount net of distributions deemed return of capital; (iii) for REO, the cost/unpaid principal balance as determined in (i) or (ii) as of the date of ownership of the property plus or minus principal balance changes subsequent to ownership. There are 19 portfolio investments recorded at zero fair value with a cost/ unpaid principal balance of approximately $357 million that are not included in the schedule above. |
36
LEHMAN BROTHERS HOLDINGS INC. and Other Debtors and Debtor-Controlled Entities
Commercial Real Estate - By Property Type And Region (1)
As of March 31, 2014
(Unaudited)
$ in millions |
North America |
Europe | Asia | Total | Cost and Unpaid Principal Balances (3) |
|||||||||||||||
Commercial Real Estate |
||||||||||||||||||||
Senior Whole Loans |
||||||||||||||||||||
Office/Industrial |
$ | 3 | $ | | $ | | $ | 3 | $ | 3 | ||||||||||
Hotel |
45 | | | 45 | 49 | |||||||||||||||
Retail |
| 8 | 10 | 18 | 73 | |||||||||||||||
Land/Other |
69 | | | 69 | 148 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total Senior Whole Loans by Type |
116 | 8 | 10 | 134 | 273 | |||||||||||||||
B-Note/Mezz Whole Loans |
||||||||||||||||||||
Office/Industrial |
1 | 119 | | 120 | 256 | |||||||||||||||
Hotel |
1 | 153 | | 154 | 149 | |||||||||||||||
Multi-family |
2 | | | 2 | 5 | |||||||||||||||
Condominium |
0 | | | 0 | 52 | |||||||||||||||
Land/Other |
3 | | | 3 | 3 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total B-Notes/Mezz Whole Loans by Type |
6 | 272 | | 278 | 464 | |||||||||||||||
Equity |
||||||||||||||||||||
Office/Industrial |
49 | 6 | | 56 | 202 | |||||||||||||||
Hotel |
58 | 38 | 2 | 98 | 244 | |||||||||||||||
Multi-family (2) |
43 | | | 43 | 74 | |||||||||||||||
Retail |
2 | | 2 | 4 | 4 | |||||||||||||||
Mixed-use |
| 32 | | 32 | 75 | |||||||||||||||
Condominium |
94 | | | 94 | 241 | |||||||||||||||
Land/Other |
127 | | 5 | 133 | 360 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total Equity by Type |
375 | 76 | 9 | 460 | 1,199 | |||||||||||||||
Real Estate Owned |
||||||||||||||||||||
Office/Industrial |
26 | | | 26 | 51 | |||||||||||||||
Hotel |
170 | | | 170 | 213 | |||||||||||||||
Multi-family |
21 | | | 21 | 41 | |||||||||||||||
Land/Other |
681 | | | 681 | 1,878 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total Real Estate Owned by Type |
897 | | | 897 | 2,183 | |||||||||||||||
Other |
17 | 14 | 1 | 32 | 65 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total Commercial Real Estate |
$ | 1,411 | $ | 369 | $ | 20 | $ | 1,801 | $ | 4,184 | ||||||||||
|
|
|
|
|
|
|
|
|
|
Notes:
(1) | Refer to the accompanying Notes to the Balance Sheets for further discussion on valuation and additional disclosures. |
(2) | During the months of January and February 2014, the Company sold all its remaining REIT Shares for total proceeds of approximately $1.0 billion. The proceeds, net of certain reserves, were subsequently used to pay down the Preferred Equity of Jupiter held by various Debtor-Controlled Entities and provided a common equity distribution to PAMI, ACQ SPV I Paper LLC, ACQ SPV II Paper LLC and third party owners. |
(3) | Cost information primarily includes: (i) for whole loans and corporate loans, the remaining outstanding principal balance; (ii) for equity, the total acquisition amount net of distributions deemed return of capital; (iii) for REO, the cost/unpaid principal balance as determined in (i) or (ii) as of the date of ownership of the property plus or minus principal balance changes subsequent to ownership. There are 19 portfolio investments recorded at zero fair value with a cost/ unpaid principal balance of approximately $357 million that are not included in the schedule above. |
37
LEHMAN BROTHERS HOLDINGS INC. and Other Debtors and Debtor-Controlled Entities
Loan Portfolio by Maturity Date and Residential Real Estate (1)
As of March 31, 2014
(Unaudited)
$ in millions | ||||||||||||||||||||||
Debtor Entities | ||||||||||||||||||||||
Maturity Date by Year |
Lehman Brothers Holdings Inc. |
Lehman Brothers Special Financing Inc. |
Lehman Commercial Paper Inc. |
Debtor - Controlled Entities |
Total LBHI - Controlled Entities |
|||||||||||||||||
Notional (2) | ||||||||||||||||||||||
2014 |
$ | | $ | | $ | 6 | $ | | $ | 6 | ||||||||||||
2015 |
| | 26 | | 26 | |||||||||||||||||
2016 |
| | 185 | | 185 | |||||||||||||||||
2017 and over |
| | 238 | | 238 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Subtotal Loans |
| | 455 | | 455 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Residential Real Estate (3) (4) |
0 | | 36 | 69 | 105 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total Loans and Residential Real Estate |
$ | 0 | $ | | $ | 491 | $ | 69 | $ | 560 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Fair Value | ||||||||||||||||||||||
2014 |
$ | | $ | | $ | 4 | $ | | $ | 4 | ||||||||||||
2015 |
| | 24 | | 24 | |||||||||||||||||
2016 |
7 | | 180 | | 187 | |||||||||||||||||
2017 and over (5) |
| | 30 | | 30 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Subtotal Loans |
7 | | 238 | | 245 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Equity positions - Loans |
31 | 9 | 3 | 62 | 105 | |||||||||||||||||
Residential Real Estate |
22 | | 14 | 64 | 100 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||
Total Loans and Residential Real Estate |
$ | 59 | $ | 9 | $ | 255 | $ | 126 | $ | 449 | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||||
|
|
Notes:
(1) | This schedule reflects loans and residential real estate assets that are included on the Balance Sheets. Refer to the accompanying Notes to the Balance Sheets for further discussion on valuation and additional disclosures. |
(2) | Represents the remaining outstanding principal balance on only Loans by stated maturity dates. |
(3) | Cost information related to Subrogated Collateral transferred to LBHI under the LBI Settlement is reflected as zero. |
(4) | Cost information primarily represents: (i) for whole loans and warehouse lines (FV $1.1 million / Cost $12.8 million), the remaining outstanding principal balance; (ii) for REO (FV $1 million / Cost $2.2 million), the unpaid principal balance as determined in the loan as of the date of ownership of the property plus or minus principal balance changes subsequent to ownership; (iii) for mortgage backed securities (MBS) (FV $83.8 million / Cost $90.2 million), the initial Class Principal amount or $100. MBS consists of Excess Spread, Residual, Interest-Only and Subordinated tranches. Cost information for MBS with a fair market value < $100, legal claims and mortgage servicing rights is not included. |
(5) | Includes approximately $13 million in LCPI related to defaulted securities with past maturity dates. |
38
LEHMAN BROTHERS HOLDINGS INC. and Other Debtors and Debtor-Controlled Entities
Private Equity / Principal Investments by Legal Entity and Product Type
As of March 31, 2014
(Unaudited)
$ in millions | Direct Investments |
GP/LP Investments (3) |
Total (1) | Assets held for the benefit of LCPI (4) |
Total per Balance Sheets |
|||||||||||||||
By Legal Entity |
||||||||||||||||||||
Debtors: |
||||||||||||||||||||
Lehman Brothers Holdings Inc. |
$ | 30 | $ | 9 | $ | 40 | $ | | $ | 40 | ||||||||||
Lehman Commercial Paper Inc. |
516 | | 516 | (400 | ) | 116 | ||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total Debtors |
547 | 9 | 556 | (400 | ) | 156 | ||||||||||||||
Debtor-Controlled: |
||||||||||||||||||||
LB I Group Inc. (2) |
586 | 513 | 1,099 | 400 | 1,499 | |||||||||||||||
Other Debtor-Controlled |
11 | 590 | 601 | | 601 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total Debtor-Controlled |
597 | 1,103 | 1,701 | 400 | 2,101 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
$ | 1,144 | $ | 1,113 | $ | 2,257 | $ | | $ | 2,257 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|||||||||||||||||||
By Product Type |
||||||||||||||||||||
Private Equity / Diversified Funds |
$ | 1,001 | $ | 758 | $ | 1,759 | ||||||||||||||
Fixed Income |
128 | 42 | 170 | |||||||||||||||||
Real Estate Funds |
| 300 | 300 | |||||||||||||||||
Other |
15 | 12 | 27 | |||||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Total |
$ | 1,144 | $ | 1,112 | $ | 2,257 | ||||||||||||||
|
|
|
|
|
|
|||||||||||||||
Investments at cost (5) |
$ | 1,499 | $ | 1,416 | $ | 2,915 | ||||||||||||||
Unpaid Principal Balances (6) |
$ | 256 | $ | | $ | 256 |
Notes:
(1) | The amounts include the unencumbered assets held by a legal entity and the economic interests in the assets held by another legal entity. Refer to the accompanying Notes to the Balance Sheets for further discussion on valuation and additional disclosures. |
(2) | LB I Group Inc. (read LB one Group Inc.) is a major Debtor-Controlled entity. LB I Group Inc. is presented on a consolidated basis. |
(3) | Includes Limited Partner (LP) interests in investment funds and General Partner (GP) ownership interests in Fund Sponsors. |
(4) | Assets held for the benefit of LCPI represents a reconciliation of the assets encumbered from LB I Group to LCPI. |
(5) | Cost information primarily includes: (i) for direct equity investments and hedge funds, the total amount funded net of distributions deemed return of capital; (ii) for partnership interests with no redemptions, the original amount funded; (iii) for partnership interests with redemptions or distributions, the ratio of cost to fair value for the underlying portfolio assets applied to the Net Asset Value for the Companys positions; and (iv) value for assets that have been recorded at de minimis fair value amounts. |
(6) | Represents the remaining outstanding principal balance on corporate loans. |
39
LEHMAN BROTHERS HOLDINGS INC. and Other Debtors
Derivatives Assets and Liabilities(1)
As of March 31, 2014
(Unaudited)
$ in millions |
Lehman Brothers Holdings Inc. |
LB 745 LLC |
Lehman Brothers Special Financing Inc. |
Lehman Brothers Commodity Services Inc. |
Lehman Brothers OTC Derivatives Inc. |
Lehman Brothers Commercial Corporation |
Lehman Commercial Paper Inc. |
Lehman Brothers Financial Products Inc. |
Lehman Brothers Derivative Products Inc. |
Merit LLC | Total Debtors | |||||||||||||||||||||||||||||||||
Assets - Receivables, Net |
||||||||||||||||||||||||||||||||||||||||||||
Open |
$ | | $ | | $ | 152 | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | 152 | ||||||||||||||||||||||
Terminated / Matured |
| | 596 | 19 | 2 | 5 | | 1 | | | 622 | |||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
Total |
| | 748 | 19 | 2 | 5 | | 1 | | | 775 | |||||||||||||||||||||||||||||||||
Other Derivative Related Assets (2) |
| | 104 | | 6 | | | | | 38 | 148 | |||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
Total Derivatives and Related Assets |
$ | | $ | | $ | 852 | $ | 19 | $ | 7 | $ | 5 | $ | | $ | 1 | $ | | $ | 38 | $ | 922 | ||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
# of Counterparty contracts Open |
| | 95 | | | | | | | | 95 | |||||||||||||||||||||||||||||||||
Termed / Matured |
| | 329 | 10 | 5 | 8 | 1 | 28 | 2 | | 383 | |||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
Total |
| | 424 | 10 | 5 | 8 | 1 | 28 | 2 | | 478 | |||||||||||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
SPV Receivables (5) |
$ | | $ | | $ | 437 | $ | | $ | | $ | | $ | | $ | | $ | | $ | | $ | 437 | ||||||||||||||||||||||
Liabilities - Payables |
||||||||||||||||||||||||||||||||||||||||||||
Agreed (3) |
$ | (19 | ) | $ | | $ | (19,161 | ) | $ | (1,332 | ) | $ | (484 | ) | $ | (342 | ) | $ | (39 | ) | $ | (57 | ) | $ | (77 | ) | $ | | $ | (21,512 | ) | |||||||||||||
Pending Resolution (4) |
(3 | ) | (2 | ) | (4,030 | ) | (58 | ) | (42 | ) | (144 | ) | | | (2 | ) | | (4,280 | ) | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
Total |
$ | (23 | ) | $ | (2 | ) | $ | (23,191 | ) | $ | (1,389 | ) | $ | (526 | ) | $ | (486 | ) | $ | (39 | ) | $ | (57 | ) | $ | (79 | ) | $ | | $ | (25,792 | ) | ||||||||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|||||||||||||||||||||||
# of Counterparty contracts |
2 | 1 | 1,747 | 186 | 104 | 141 | 2 | 10 | 42 | | 2,235 |
Notes:
(1) | Refer to the accompanying Notes to the Balance Sheets for further discussion regarding derivative amounts recorded. Derivatives liabilities are presented prior to distributions on allowed claims. |
(2) | Amounts primarily include notes in various special purpose vehicles, deposits with various brokers for OTC hedges and equity positions in various corporations. |
(3) | Agreed is defined as claims that are recorded at values agreed upon with counterparties and classified as allowed or accepted as filed. |
(4) | Pending Resolution are recorded at expected claim amounts estimated by the Company. |
(5) | Represents the portion of derivatives receivables resulting from transactions with counterparties deemed as special purpose vehicles including receivables from entities that structurally subordinate the rights of the Debtor. |
40
LEHMAN BROTHERS HOLDINGS INC. and Other Debtors and Debtor-Controlled Entities
Unfunded Lending and Private Equity / Principal Investments Commitments (1)
As of June 30, 2014
(Unaudited)
Debtor Entities | ||||||||||||||||||||
$ in millions |
Lehman Brothers Holdings Inc. |
Lehman Commercial Paper Inc. |
Total Debtor Entities |
Debtor- Controlled Entities |
Total LBHI Controlled Entities |
|||||||||||||||
Real Estate |
||||||||||||||||||||
Commercial |
$ | | $ | | $ | | $ | 6 | $ | 6 | ||||||||||
Loans |
| 1 | 1 | | 1 | |||||||||||||||
Private Equity / Principal Investments |
||||||||||||||||||||
Private Equity Platform |
| | | 201 | 201 | |||||||||||||||
Direct Investments |
| | | 1 | 1 | |||||||||||||||
GP / LP Investments |
1 | | 1 | 8 | 9 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
1 | | 1 | 210 | 210 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
Total |
$ | 1 | $ | 1 | $ | 2 | $ | 216 | $ | 217 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|||||||||||
|
|
|
|
Notes:
(1) | The schedule includes fully and partially unfunded commitments as of June 30, 2014, under corporate loan agreements and real estate and private equity partnerships made by the Company prior to the Chapter 11 cases. |
41