LEHMAN BROTHERS HOLDINGS INC. PLAN TRUST - FORM 8-K - EX-99.1

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8-K - 8-K - LEHMAN BROTHERS HOLDINGS INC. PLAN TRUST	d861778d8k.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
		Jointly Administered
Debtors.

QUARTERLY FINANCIAL REPORT

AS OF OCTOBER 3, 2019


DEBTORS’ ADDRESS:		LEHMAN BROTHERS HOLDINGS INC.
		c/o KRISTINE DICKSON – CHIEF FINANCIAL OFFICER
		277 PARK AVENUE
		46th FLOOR
		NEW YORK, NY 10172

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: January 10, 2020

Quarterly Financial Report as of October 3, 2019 (Unaudited)

Table of Contents


I.	Schedule of Debtors	3

II.	Cash Flow Estimates	4

III.	Notes to the Cash Flow Estimates	12

	Note 1 – Basis of Presentation	12

	Note 2 – Other Receipts	15

	Note 3 – Due from/to Non–Controlled Affiliates	16

	Note 4 – Due from/to Debtors and Debtor–Controlled Entities	20

	Note 5 – Disputed Claims	23

	Note 6 – Legal Proceedings	24

	Note 7 – Taxes Payable	28

	Note 8 – Subsequent Events	28

IV.	Balance Sheets	29

QUESTIONS

The Company has established an email address to receive questions from readers regarding this presentation and its other financial disclosures. 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 relative to the value of information requested, the Company shall endeavor to post a response on the website listed below (maintaining the anonymity of the originators of the questions). The Company assumes no obligation to respond to email inquiries.

Please email questions, with document references as relevant, to:

QUESTIONS@lehmanholdings.com

The Company’s previously posted responses can be found on the Epiq website maintained for the Company:

www.lehman-docket.com under the Key Documents tab and the Responses to Questions Submitted category


		Page 2

Quarterly Financial Report as of October 3, 2019 (Unaudited)

I.	Schedule of Debtors

The twenty three entities listed below (the “Debtors”) filed for bankruptcy in the United States Bankruptcy Court for the 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 of Lehman Brothers Holdings Inc. and its Affiliated Debtors (the “Plan”). On March 6, 2012, the “Effective Date” (as defined in the Plan) occurred. As of the date hereof, the following Debtors’ chapter 11 cases remain open:


	Case No.		Date Filed (“Commencement Date”)
Lehman Brothers Holdings Inc. (“LBHI”)		08-13555		9/15/2008
Lehman Brothers Special Financing Inc. (“LBSF”)		08-13888		10/3/2008
Lehman Brothers OTC Derivatives Inc. (“LOTC”)		08-13893		10/3/2008
Lehman Commercial Paper Inc. (“LCPI”)		08-13900		10/5/2008
BNC Mortgage LLC		09-10137		1/9/2009

The following Debtors’ chapter 11 cases were closed in 2016, 2018 and 2019, pursuant to final decrees entered by the Bankruptcy Court (Docket No. 51920, No. 54163, No. 58257 and No. 59472):

Case No.

Date Filed

Date Closed

LB 745 LLC

08-13600

9/16/2008

1/28/2016

PAMI Statler Arms LLC

08-13664

9/23/2008

1/28/2016

CES Aviation LLC

08-13905

10/5/2008

1/28/2016

CES Aviation V LLC

08-13906

10/5/2008

1/28/2016

CES Aviation IX LLC

08-13907

10/5/2008

1/28/2016

LB 2080 Kalakaua Owners LLC

09-12516

4/23/2009

1/28/2016

LB Somerset LLC

09-17503

12/22/2009

1/28/2016

LB Preferred Somerset LLC

09-17505

12/22/2009

1/28/2016

East Dover Limited

08-13908

10/5/2008

12/15/2016

Luxembourg Residential Properties Loan Finance S.a.r.l.

09-10108

1/7/2009

12/15/2016

Merit LLC

09-17331

12/14/2009

12/15/2016

Lehman Brothers Derivative Products Inc. (“LBDP”)

08-13899

10/5/2008

06/14/2018

Lehman Brothers Financial Products Inc. (“LBFP”)

08-13902

10/5/2008

06/14/2018

Lehman Scottish Finance L.P.

08-13904

10/5/2008

06/14/2018

LB Rose Ranch LLC

09-10560

2/9/2009

06/14/2018

Lehman Brothers Commodity Services Inc. (“LBCS”)

08-13902

10/3/2008

02/11/2019

Lehman Brothers Commercial Corporation (“LBCC”)

08-13901

10/5/2008

02/11/2019

Structured Asset Securities Corporation

09-10558

2/9/2009

02/11/2019


		Page 3

Quarterly Financial Report as of October 3, 2019 (Unaudited)

II.

Cash Flow Estimates

Lehman Brothers Holdings Inc.


($ in millions)		As of 6/30/19			Cash Activity 7/1/19 - 10/3/19			Estimate Changes			Transfers, Reclassifications, Adjustments ^(e)			As of 10/3/19
CASH AND INVESTMENTS
Reserves for Claims:
Disputed unsecured claims		$	52		$	(0	)	$	(22	)	$	—		$	30
Distributions on Allowed Claims (not remitted)			6			3			—			—			9
Secured, Admin, Priority Claims and Other			16			(0	)		(5	)		—			11

Subtotal – Reserves for Claims			73			3			(26	)		—			50
Reserves for Operating Expenses			94			(11	)		14			—			97
Reserves for Incentive Fees			3			(1	)		(1	)		—			2
Other Reserves			6			(1	)		(0	)		—			5

Total Cash & Investments – Restricted			177			(9	)		(13	)		—			154
Total Cash & Investments – Unrestricted			511			(454	)		13			—			70

TOTAL CASH AND INVESTMENTS [A]		$	687		$	(463	)	$	—		$	—		$	224

CASH FLOW ESTIMATES
Net Receipts
Commercial Real Estate		$	—		$	—		$	—		$	—		$	—
Residential Real Estate and Other			7			(8	)		8			—			6
Private Equity/Principal Investments			1			(0	)		3			—			3
Derivatives			—			—			—			—			—
Other	Note 2		80			(18	)		7			—			69

Sub-Total – Net Receipts			87			(27	)		18			—			78
Recoveries From Non-Controlled Affiliates	Note 3
Europe			519			(224	)		10			—			304
Asia			128			(39	)		(3	)		(33	)		53

Sub-Total – Recoveries From Non-Controlled Affiliates			647			(263	)		6			(33	)		358
Recoveries From Controlled Affiliates
Pre-Petition Intercompany Receipts ^(a)	Note 4		129			(32	)		3			—			100
Net Post-Petition Intercompany Receipts from / (Payables to) ^(b)			(50	)		(18	)		(11	)		—			(79	)
Investments in Affiliates ^(c)			880			—			(49	)		33			863

Sub-Total – Recoveries From Controlled Affiliates			959			(50	)		(57	)		33			885
Operating Expenses			(112	)		11			(14	)		—			(115	)
Incentive Fees			(3	)		1			1			—			(2	)
Estimated Taxes Payable	Note 7		(41	)		—			7			—			(34	)

TOTAL CFO + OTHER RECEIPTS [B]		$	1,536		$	(328	)	$	(39	)	$	—		$	1,170

OTHER ADJUSTMENTS
(Less): Cash held for the benefit of third parties ^(d)		$	(11	)	$	(3	)	$	(0	)	$	—		$	(14	)
Plus/(Less): Plan Adjustments from/(to) Participatory Debtors			8			(3	)		(0	)		—			5

TOTAL OTHER ADJUSTMENTS [C]		$	(3	)	$	(6	)	$	(0	)	$	—		$	(9	)

ESTIMATED CASH AVAILABLE FOR DISTRIBUTIONS [A+B+C]		$	2,220		$	(797	)	$	(39	)	$	—		$	1,385

(a)	The Company estimates that LBHI will receive approximately $0.1 billion, primarily from LCPI and LBSF.

(b)

Aurora Commercial Corp. (formerly known as Aurora Bank FSB) (“Aurora”) is a wholly-owned subsidiary of Lehman Brothers Bancorp Inc. (“LBB”), which is a wholly-owned subsidiary of LBHI. As of October 3, 2019, LBHI had an intercompany loan due to Aurora of $69 million. On March 24, 2019, Aurora and its subsidiary Aurora Loan Services filed chapter 11 petitions in the Bankruptcy Court. Additional information and filings in the cases can be found at https://cases.primeclerk.com/Aurora/.

(c)

The Company estimates that LBHI will receive approximately $0.9 billion related to Investments in Affiliates, primarily from Lehman Brothers Holdings Scottish LP 2 (“SLP2”). SLP2 is the parent company of Lehman Brothers Holdings Scottish LP 3 (“SLP3”) and is wholly owned by LBHI. Estimate Changes include the impact of movements in foreign exchange rates during the period.

(d)	Amounts excluded from Cash Available for Distributions include Distributions on Allowed Claims (not remitted) and other items.

(e)

Transfers reflects the distribution in specie from Lehman Brothers Investments PTE Ltd (“LBIP”) to LBHI of all of the outstanding common shares in Lehman Brothers Capital Private Limited (“LBCPL”) and Lehman Brothers Securities Private Limited (“LBSPL”) pursuant to a Deed of Transfer. A portion of LBHI’s estimated recoveries from LBIP related to LBCPL and LBSPL has been reclassified from Recoveries from Non-Controlled Affiliates to Investments in Affiliates.


		Page 4

Quarterly Financial Report as of October 3, 2019 (Unaudited)

Lehman Brothers Special Financing Inc.


($ in millions)		As of 6/30/19			Cash Activity 7/1/19 – 10/3/19			Estimate Changes			Transfers, Reclassifications, Adjustments		As of 10/3/19
CASH AND INVESTMENTS
Reserves for Claims:
Disputed unsecured claims		$	1		$	(1	)	$	(1	)	$	—	$	—
Distributions on Allowed Claims (not remitted)			—			(0	)		0			—		0
Secured, Admin, Priority Claims and Other			8			(5	)		—			—		3

Subtotal - Reserves for Claims			10			(6	)		(1	)		—		3
Reserves for Operating Expenses			7			(1	)		1			—		7
Reserves for Incentive Fees			1			(0	)		(0	)		—		0
Other Reserves			—			—			—			—		—

Total Cash & Investments - Restricted			17			(7	)		(0	)		—		10
Total Cash & Investments - Unrestricted			14			(10	)		0			—		4

TOTAL CASH AND INVESTMENTS [A]		$	31		$	(17	)	$	(0	)	$	—	$	14

CASH FLOW ESTIMATES
Net Receipts
Commercial Real Estate		$	—		$	—		$	—		$	—	$	—
Residential Real Estate and Other			—			—			—			—		—
Private Equity/Principal Investments			—			—			—			—		—
Derivatives			14			(4	)		1			—		11
Other	Note 2		3			(1	)		0			—		2

Sub-Total - Net Receipts			17			(5	)		1			—		13
Recoveries From Non-Controlled Affiliates	Note 3
Europe			—			—			—			—		—
Asia			—			—			—			—		—
Sub-Total - Recoveries From Non-Controlled Affiliates			—			—			—			—		—

Recoveries From Controlled Affiliates
Pre-Petition Intercompany Receipts	Note 4		18			(7	)		(0	)		—		11
Net Post-Petition Intercompany Receipts from / (Payables to)			(8	)		8			(1	)		—		(1	)
Investments in Affiliates			—			—			—			—		—

Sub-Total - Recoveries From Controlled Affiliates			10			1			(1	)		—		11
Operating Expenses			(8	)		1			(1	)		—		(8	)
Incentive Fees			(1	)		0			0			—		(0	)
Estimated Taxes Payable	Note 7		—			—			—			—		—

TOTAL CFO + OTHER RECEIPTS [B]		$	18		$	(3	)	$	(1	)	$	—	$	15

OTHER ADJUSTMENTS
(Less): Cash held for the benefit of third parties		$	—		$	0		$	(0	)	$	—	$	(0	)
Plus/(Less): Plan Adjustments from/(to) Participatory Debtors			(3	)		1			(0	)		—		(2	)

TOTAL OTHER ADJUSTMENTS [C]		$	(3	)	$	1		$	(0	)	$	—	$	(2	)

ESTIMATED CASH AVAILABLE FOR DISTRIBUTIONS [A+B+C]		$	46		$	(19	)	$	(1	)	$	—	$	27


		Page 5

Quarterly Financial Report as of October 3, 2019 (Unaudited)

Lehman Commercial Paper Inc.


($ in millions)		As of 6/30/19			Cash Activity 7/1/19 - 10/3/19			Estimate Changes			Transfers, Reclassifications, Adjustments		As of 10/3/19
CASH AND INVESTMENTS
Reserves for Claims:
Disputed unsecured claims		$	—		$	—		$	—		$	—	$	—
Distributions on Allowed Claims (not remitted)			0			(0	)		(0	)		—		0
Secured, Admin, Priority Claims and Other			1			(1	)		1			—		1

Subtotal - Reserves for Claims			1			(1	)		1			—		1
Reserves for Operating Expenses			2			(0	)		0			—		2
Reserves for Incentive Fees			1			(0	)		(0	)		—		1
Other Reserves			(2	)		—			3			—		1

Total Cash & Investments - Restricted			3			(2	)		4			—		5
Total Cash & Investments - Unrestricted			2			3			(4	)		—		1

TOTAL CASH AND INVESTMENTS [A]		$	5		$	1		$	—		$	—	$	5

CASH FLOW ESTIMATES
Net Receipts
Commercial Real Estate		$	1		$	(0	)	$	2		$	—	$	3
Residential Real Estate and Other			2			—			—			—		2
Private Equity/Principal Investments			0			—			—			—		0
Derivatives			—			—			—			—		—
Other	Note 2		—			(0	)		0			—		—

Sub-Total - Net Receipts			3			(0	)		2			—		5
Recoveries From Non-Controlled Affiliates	Note 3
Europe			0			(0	)		(0	)		—		0
Asia			—			—			—			—		—

Sub-Total - Recoveries From Non-Controlled Affiliates			0			(0	)		(0	)		—		0
Recoveries From Controlled Affiliates
Pre-Petition Intercompany Receipts	Note 4		65			(26	)		(0	)		—		39
Net Post-Petition Intercompany Receipts from / (Payables to)			(2	)		2			(1	)		—		(1	)
Investments in Affiliates			2			(1	)		0			—		1

Sub-Total - Recoveries From Controlled Affiliates			65			(25	)		(1	)		—		39
Operating Expenses			(3	)		0			(0	)		—		(3	)
Incentive Fees			(1	)		0			0			—		(1	)
Estimated Taxes Payable	Note 7		(5	)		—			(0	)		—		(5	)

TOTAL CFO + OTHER RECEIPTS [B]		$	60		$	(25	)	$	1		$	—	$	35

OTHER ADJUSTMENTS
(Less): Cash held for the benefit of third parties		$	—		$	0		$	(1	)	$	—	$	(1	)
Plus/(Less): Plan Adjustments from/(to) Participatory Debtors			(5	)		2			0			—		(3	)

TOTAL OTHER ADJUSTMENTS [C]		$	(5	)	$	2		$	(1	)	$	—	$	(4	)

ESTIMATED CASH AVAILABLE FOR DISTRIBUTIONS [A+B+C]		$	59		$	(22	)	$	(0	)	$	—	$	37


		Page 6

Quarterly Financial Report as of October 3, 2019 (Unaudited)

Lehman Brothers OTC Derivatives Inc.


($ in millions)		As of 6/30/19			Cash Activity 7/1/19 - 10/3/19			Estimate Changes			Transfers, Reclassifications, Adjustments		As of 10/3/19
CASH AND INVESTMENTS
Reserves for Claims:
Disputed unsecured claims		$	—		$	—		$	—		$	—	$	—
Distributions on Allowed Claims (not remitted)			—			—			—			—		—
Secured, Admin, Priority Claims and Other			—			—			0			—		0

Subtotal - Reserves for Claims			—			—			0			—		0
Reserves for Operating Expenses			—			(0	)		0			—		—
Reserves for Incentive Fees			—			—			—			—		—
Other Reserves			0			(0	)		(0	)		—		—

Total Cash & Investments - Restricted			0			(0	)		0			—		0
Total Cash & Investments - Unrestricted			0			(0	)		(0	)		—		0

TOTAL CASH AND INVESTMENTS [A]		$	1		$	(0	)	$	0		$	—	$	1

CASH FLOW ESTIMATES
Net Receipts
Commercial Real Estate		$	—		$	—		$	—		$	—	$	—
Residential Real Estate and Other			—			—			—			—		—
Private Equity/Principal Investments			—			—			—			—		—
Derivatives			—			—			—			—		—
Other	Note 2		—			—			—			—		—

Sub-Total - Net Receipts			—			—			—			—		—
Recoveries From Non-Controlled Affiliates	Note 3
Europe			—			—			—			—		—
Asia			—			—			—			—		—

Sub-Total - Recoveries From Non-Controlled Affiliates			—			—			—			—		—
Recoveries From Controlled Affiliates
Pre-Petition Intercompany Receipts	Note 4		(0	)		—			0			—		—
Net Post-Petition Intercompany Receipts from / (Payables to)			—			0			(0	)		—		(0	)
Investments in Affiliates			—			—			—			—		—

Sub-Total - Recoveries From Controlled Affiliates			(0	)		0			(0	)		—		(0	)
Operating Expenses			—			0			(0	)		—		—
Incentive Fees			(0	)		—			0			—		—
Estimated Taxes Payable	Note 7		—			—			—			—		—

TOTAL CFO + OTHER RECEIPTS [B]		$	(0	)	$	0		$	0		$	—	$	(0	)

OTHER ADJUSTMENTS
(Less): Cash held for the benefit of third parties		$	—		$	0		$	(0	)	$	—	$	—
Plus/(Less): Plan Adjustments from/(to) Participatory Debtors			—			—			—			—		—

TOTAL OTHER ADJUSTMENTS [C]		$	—		$	0		$	(0	)	$	—	$	—

ESTIMATED CASH AVAILABLE FOR DISTRIBUTIONS [A+B+C]		$	0		$	0		$	0		$	—	$	0


		Page 7

Quarterly Financial Report as of October 3, 2019 (Unaudited)

BNC Mortgage LLC


($ in millions)		As of 6/30/19			Cash Activity 7/1/19 -10/3/19			Estimate Changes			Transfers, Reclassifications, Adjustments		As of 10/3/19
CASH AND INVESTMENTS
Reserves for Claims:
Disputed unsecured claims		$	—		$	—		$	—		$	—	$	—
Distributions on Allowed Claims (not remitted)			0			0			(0	)		—		0
Secured, Admin, Priority Claims and Other			0			—			(0	)		—		—

Subtotal – Reserves for Claims			0			0			(0	)		—		0
Reserves for Operating Expenses			0			(0	)		(0	)		—		—
Reserves for Incentive Fees			—			0			(0	)		—		—
Other Reserves			1			(0	)		(1	)		—		—

Total Cash & Investments – Restricted			2			(0	)		(1	)		—		0
Total Cash & Investments – Unrestricted			10			(9	)		1			—		2

TOTAL CASH AND INVESTMENTS [A]		$	11		$	(10	)	$	0		$	—	$	2

CASH FLOW ESTIMATES
Net Receipts
Commercial Real Estate		$	—		$	—		$	—		$	—	$	—
Residential Real Estate and Other			—			—			—			—		—
Private Equity/Principal Investments			—			—			—			—		—
Derivatives			—			—			—			—		—
Other	Note 2		—			(2	)		2			—		—

Sub-Total – Net Receipts			—			(2	)		2			—		—
Recoveries From Non-Controlled Affiliates	Note 3
Europe			—			—			—			—		—
Asia			—			—			—			—		—

Sub-Total – Recoveries From Non-Controlled Affiliates			—			—			—			—		—
Recoveries From Controlled Affiliates
Pre-Petition Intercompany Receipts	Note 4		—			—			—			—		—
Net Post-Petition Intercompany Receipts from / (Payables to)			(1	)		2			(0	)		—		1
Investments in Affiliates			—			—			—			—		—

Sub-Total – Recoveries From Controlled Affiliates			(1	)		2			(0	)		—		1
Operating Expenses			(0	)		0			0			—		—
Incentive Fees			—			(0	)		0			—		—
Estimated Taxes Payable	Note 7		—			—			—			—		—
TOTAL CFO + OTHER RECEIPTS [B]		$	(1	)	$	1		$	2		$	—	$	1

OTHER ADJUSTMENTS
(Less): Cash held for the benefit of third parties		$	—		$	0		$	(0	)	$	—	$	(0	)
Plus/(Less): Plan Adjustments from/(to) Participatory Debtors			—			—			—			—		—

TOTAL OTHER ADJUSTMENTS [C]		$	—		$	0		$	(0	)	$	—	$	(0	)

ESTIMATED CASH AVAILABLE FOR DISTRIBUTIONS [A+B+C]		$	10		$	(9	)	$	1		$	—	$	2


		Page 8

Quarterly Financial Report as of October 3, 2019 (Unaudited)

Debtor-Controlled Entities


($ in millions)		As of 6/30/19			Cash Activity 7/1/19 - 10/3/19			Estimate Changes			Transfers, Reclassifications, Adjustments ^(b)		As of 10/3/19
CASH AND INVESTMENTS
Reserves for Claims:
Disputed unsecured claims		$	—		$	—		$	—		$	—	$	—
Distributions on Allowed Claims (not remitted)			—			—			—			—		—
Secured, Admin, Priority Claims and Other			—			—			—			—		—

Subtotal – Reserves for Claims			—			—			—			—		—
Reserves for Operating Expenses			2			(1	)		1			—		3
Reserves for Incentive Fees			—			—			—			—		—
Other Reserves			18			(4	)		(3	)		—		11

Total Cash & Investments – Restricted			21			(5	)		(2	)		—		14
Total Cash & Investments – Unrestricted			46			(6	)		2			33		75

TOTAL CASH AND INVESTMENTS [A]		$	67		$	(11	)	$	0		$	33	$	88

CASH FLOW ESTIMATES
Net Receipts
Commercial Real Estate		$	2		$	(0	)	$	0		$	—	$	1
Residential Real Estate and Other			—			—			—			—		—
Private Equity/Principal Investments			48			(15	)		1			—		34
Derivatives			—			—			—			—		—
Other	Note 2		8			(6	)		(0	)		—		3

Sub-Total – Net Receipts			58			(21	)		1			—		38
Recoveries From Non-Controlled Affiliates	Note 3
Europe ^(a)			856			—			(53	)		—		803
Asia			—			—			—			—		—

Sub-Total – Recoveries From Non-Controlled Affiliates			856			—			(53	)		—		803
Recoveries From Controlled Affiliates
Pre-Petition Intercompany Receipts	Note 4		0			—			(0	)		—		—
Net Post-Petition Intercompany Receipts from / (Payables to)			61			7			12			—		80
Investments in Affiliates			—			—			2			—		2

Sub-Total – Recoveries From Controlled Affiliates			61			7			14			—		82
Operating Expenses			(2	)		1			(2	)		—		(3	)
Incentive Fees			—			—			—			—		—
Estimated Taxes Payable	Note 7		(2	)		—			—			—		(2	)

TOTAL CFO + OTHER RECEIPTS [B]		$	972		$	(13	)	$	(40	)	$	—	$	919

OTHER ADJUSTMENTS
(Less): Cash held for the benefit of third parties		$	—		$	—		$	—		$	—	$	—
Plus/(Less): Plan Adjustments from/(to) Participatory Debtors			—			—			—			—		—

TOTAL OTHER ADJUSTMENTS [C]		$	—		$	—		$	—		$	—	$	—

ESTIMATED CASH AVAILABLE FOR DISTRIBUTIONS [A+B+C] ^(c)		$	1,038		$	(24	)	$	(40	)	$	33	$	1,007

(a)

The Company estimates that Debtor-Controlled Entities will collect approximately $0.8 billion of Recoveries from Non-Controlled Affiliates, primarily from Lehman Brothers Holdings Intermediate 2 Ltd (“LBHI2”). Estimate Changes include the impact of movements in foreign exchange rates during the period and other reductions in estimates, a portion of which are offset by an increase in Estimated Recoveries from Non-Controlled Affiliates at LBHI.

(b)	Transfers reflects the distribution in specie from LBIP to LBHI of all of the outstanding common shares in LBCPL and LBSPL pursuant to a Deed of Transfer. Cash held by LBCPL and LBSPL is included in Unrestricted Cash & Investments herein.

(c)	Estimated Cash Available for Distributions from Debtor-Controlled Entities may include potential payments to third parties.


		Page 9

Quarterly Financial Report as of October 3, 2019 (Unaudited)

Estimated Future Recoveries By Debtor

The following schedules show the estimated remaining recoveries for each of LBHI, LBSF and LCPI by claim class, based on the “Estimated Cash Available for Distributions” in the preceding tables. The estimated remaining recoveries on the previous pages and the schedules below do not include (a) potential recoveries from Affirmative Litigations, and (b) estimates for potential allowed amounts of disputed claims.

($ in millions)

Lehman Brothers Holdings Inc.


		Allowed Claims Eligible for Distributions ⁽¹⁾		Estimated Remaining Recovery		Estimated Remaining Recovery % as of 10.03.2019			Actual Recovery % Thru D19 ⁽²⁾			Estimated End of Case Recovery %
Class	Designation	$		$		A			B			*= A + B*
3	Senior Unsecured	$	82,542	$	688		0.834	%		45.983	%		46.817	%
4A	Senior Affiliate Claims		39,521		292		0.740	%		36.999	%		37.739	%
4B	Senior Affiliate Guarantee		10,527		76		0.724	%		36.103	%		36.826	%
5	Senior Third-Party Guarantee		31,920		185		0.579	%		28.886	%		29.465	%
7	General Unsecured		5,242		41		0.775	%		43.051	%		43.825	%
8	Derivative Affiliate / Affiliate Guarantee Claims		451		3		0.680	%		33.992	%		34.673	%
9A	Third Party Guarantee Derivatives		18,294		100		0.544	%		27.191	%		27.735	%
9B	Third Party Guarantee Derivatives RACER’s		—		—		0.331	%		16.531	%		16.862	%
10A	Subordinated Class 10A Claims		3,399		—		—			—			—
10B	Subordinated Class 10B Claims		10,330		—		—			—			—
10C	Subordinated Class 10C Claims		1,493		—		—			—			—

	Total	$	203,720	$	1,385

Lehman Brothers Special Financing Inc.


		Allowed Claims Eligible for Distributions ⁽¹⁾		Estimated Remaining Recovery		Estimated Remaining Recovery % as of 10.03.2019			Recovery % Thru D19			Estimated Cumulative Recovery % as of 10.03.2019
Class	Designation	$		$		A			B			*= A + B*
4A	GUC not Designated Entities	$	19,675	$	14		0.071	%		40.300	%		40.372	%
4B	GUC Designated Entities		1,948		1		0.037	%		20.433	%		20.470	%
5A	Affiliate Claims of LBHI		15,173		11		0.076	%		40.885	%		40.961	%
5B	Affiliate Claims of Participating Subs		522		0		0.061	%		33.594	%		33.655	%
5C	Affiliate claims		1,689		1		0.071	%		39.799	%		39.870	%

	Total	$	39,006	$	27

Lehman Commercial Paper Inc.


		Allowed Claims Eligible for Distributions ⁽¹⁾		Estimated Remaining Recovery		Estimated Remaining Recovery % as of 10.03.2019			Recovery % Thru D19			Estimated Cumulative Recovery % as of 10.03.2019
Class	Designation	$		$		A			B			*= A + B*
4A	GUC not Designated Entities	$	1,539	$	2		0.135	%		77.425	%		77.561	%
4B	GUC Designated Entities		5,230		7		0.126	%		66.016	%		66.142	%
5A	Affiliate Claims of LBHI		13,738		22		0.157	%		81.792	%		81.949	%
5B	Affiliate Claims of Participating Subs		5		0		0.126	%		66.016	%		66.142	%
5C	Affiliate claims		4,822		7		0.135	%		70.967	%		71.103	%

	Total	$	25,334	$	37


		Page 10

Quarterly Financial Report as of October 3, 2019 (Unaudited)

(1)	Estimated Recovery percentages are calculated based on recoveries of Allowed Claims Eligible for Distributions as reported on Exhibit D of the 19th Distribution Notice filed on September 26, 2019 [Docket No. 59954]. For purposes of this illustrative calculation only:

Allowed claims exclude (i) claims against LBHI satisfied in full through the combination of the primary obligor and guarantee distributions from LBHI, and (ii) previously Allowed Claims that have been withdrawn.

Disputed claims are assumed to be allowed at zero, and all cash reserves currently held on behalf of holders of disputed claims are assumed to be released for the benefit of all holders of Allowed Claims.

Allowed Claims Eligible for Distributions exclude Allowed Claims that each Debtor owns against itself.

(2)	Through D19, the Debtors have made distributions to creditors totaling $127.9 billion, of which $95.0 billion were payments on account of claims owned or formerly owned by third party creditors.

During the period, the Debtors made two distributions to creditors. On July 18, 2019, the Debtors made their eighteenth Plan Distribution to creditors, distributing approximately $563 million (see Notice of Distribution – Docket No. 59816). On October 3, 2019, The Debtors made their nineteenth Plan Distribution to creditors, distributing approximately $393 million (see Notice of Distribution – Docket No. 59954).


		Page 11

Quarterly Financial Report as of October 3, 2019 (Unaudited)

III.

Notes to the Cash Flow Estimates

Note 1 – Basis of Presentation

Objectives

On the Effective Date, the Plan became effective and the Debtors emerged from bankruptcy with a new Board of Directors (LBHI’s Board of Directors hereinafter referred to as the “Board”). The Company continues to pursue the objectives 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 Plan Administrator has made and expects to continue to make distributions to creditors of Debtors, with each entity subject to review at each distribution date.

Basis of Presentation

The information and data included in the Quarterly Financial Report, including the Notes to the Cash Flow Estimates (the “Quarterly Financial Report”) are derived from sources available to the Debtors and Debtor-Controlled Entities (collectively, the “Company” or “Controlled Affiliates”). The term “Debtor-Controlled Entities” refers to those entities that are directly or indirectly controlled by LBHI and have not filed for protection under Chapter 11 of the Bankruptcy Code. Debtor-Controlled Entities excludes, among others, certain entities (such as Lehman Brothers Inc. (“LBI”) and Lehman Brothers International (Europe) (in administration) (“LBIE”)) 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”).

The information and data included in these cash flow estimates and notes thereto (the “October 3, 2019 Cash Flow Estimates”) were prepared to update the June 30, 2019 Cash Flow Estimates filed July 29, 2019 (the “June 30, 2019 CFE”), and are based on estimated cash flows from assets managed in an orderly wind down and/or sale (and related costs of operations) until the Company’s activities are fully resolved.

These October 3, 2019 Cash Flow Estimates include an estimate of expenses to be paid through final termination of the Company on such matters as asset disposition, litigation and disputed claims resolution, administrative wind-down, and related activities. These estimates also include the estimated costs of a small subset of the Company’s current staff committed to stay for many years, if necessary, to oversee the resolution of remaining disputes, other matters and residual wind down activities. These estimates are subject to ongoing review and revision. Actual expenses may differ materially from these estimates.

The Company has prepared the Quarterly Financial Report based on the information available to the Company at the date of filing; however, such information may be incomplete and may be materially deficient. Material uncertainties continue to exist regarding the ultimate value realizable from the Company’s assets, the timing of asset recoveries, future costs, and the eventual level of allowed creditors’ claims. Accordingly, the Quarterly Financial Report is 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.

In preparing the Quarterly Financial Report, the Company made various estimates and assumptions based on information available to the Company. As such, this report contains forward-looking statements that involve known and unknown risks, uncertainties and other factors which may cause the Company’s actual results, performance or achievements to be materially different from any future results, performance 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. Accordingly, the financial information herein is subject to change and any such change may be material.


		Page 12

Quarterly Financial Report as of October 3, 2019 (Unaudited)

Note 1 – Basis of Presentation (continued)

The Quarterly Financial Report should be read in conjunction with the Company’s previous filings, including Form 8-K reports as filed with the United States Securities and Exchange Commission (“SEC”), the Plan and related Disclosure Statement (the “Disclosure Statement”) dated August 31, 2011, and other documents filed after the Commencement Dates with various regulatory agencies or the Bankruptcy Court by LBHI, other Debtors and Debtor-Controlled Entities.

Future expenses and distributions are dependent in large measure on the resolution of various legal matters involving the Company and its Non-Controlled Affiliates. (See Litigation below.) The remaining legal matters require resolution in the United States, as well as multiple foreign jurisdictions, including the United Kingdom, France, Germany, India, Spain and Australia. The timing for achieving final administrative or judicial resolution of these legal issues is uncertain. As a consequence, the Company cannot definitively specify a date for the final termination of its activities.

All cash flows in these Estimates are presented on an undiscounted basis.

Key Assumptions

Recoveries from Non-Controlled Affiliates

Estimates of recoveries from Non-Controlled Affiliates are based on internal valuation models utilizing information obtained from both Non-Controlled Affiliates’ fiduciaries, as well as information obtained by the Company through settlement negotiations and involvement on creditors’ committees.

The Company’s estimates for recoveries from Non-Controlled Affiliates include estimates for recoveries related to LBIE and the Joint Venture (see Note 3 for additional information), as well as estimated recoveries from other Non-Controlled Affiliates in Europe and Asia.

Certain receivables from Non-Controlled Affiliates are denominated in foreign currencies, and as such, estimated recoveries related to these receivables are subject to movements in foreign exchange rates. The Company does not hedge against movements in foreign exchange rates.

The majority of estimated remaining recoveries from Non-Controlled Affiliates are contingent upon (i) the resolution of matters in dispute and/or active litigation, (ii) the receipt of non-U.S. government and/or Court approvals, and/or (iii) the final wind down of estates not controlled by the Plan Administrator. As such, the timing and amount of future recoveries from Non-Controlled Affiliates is uncertain, and actual recoveries may differ materially from these estimates.

Litigation

The Company is involved directly and/or indirectly in numerous litigations that will impact its recoveries from Non-Controlled Affiliates. The Company’s estimates of recoveries from Non-Controlled Affiliates incorporate the Company’s current assumptions regarding the resolution of these matters (see Other Litigations in Note 6 for additional information).

In addition, the Company has certain litigation pending against parties other than Non-Controlled Affiliates in U.S. courts which may result in potential recoveries to the Company (“Affirmative Litigations”), the largest of which are described in Note 6. For the purpose of these October 3, 2019 Cash Flow Estimates, (i) potential recoveries from Affirmative Litigations are not included, unless the Company has reached agreements in principle with the corresponding counterparties, and (ii) the estimated costs (i.e., professional, legal and advisory fees) of supporting Affirmative Litigations are included.

Intercompany Recoveries Among Controlled Entities

The October 3, 2019 Cash Flow Estimates reflect the following in the calculation of intercompany recoveries between and among Debtors and Debtor-Controlled Entities:

•

Allowed Claims as of October 3, 2019;

•

Unresolved third party claims as of October 3, 2019 are estimated at zero; and

•

Equity distributions from Debtors and Debtor-Controlled Entities.


		Page 13

Quarterly Financial Report as of October 3, 2019 (Unaudited)

Note 1 – Basis of Presentation (continued)

Reporting of Claim Assignments

As part of the Company’s planned operational wind down and legal entity dissolution process, the Company has assigned and will continue to assign claims among Controlled Entities, typically from a subsidiary entity to a parent entity, with no resulting economic effect on estimated overall recoveries. These assignments are reflected in the “Transfers, Reclassifications, Adjustments” column in the tables herein. For claim assignments in which Debtor entities are assigned claims against themselves (i.e., when LBHI is assigned a claim against LBHI), the receivables and payables are netted.

This Quarterly Financial Report:

•

Reflects activities through October 3, 2019, including the nineteenth Plan Distribution (“D19”);

•

Is not audited nor prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”);

•

Includes certain items that remain under continuing review by the Company and may be accounted for differently in future Quarterly Financial Reports.

Due from/to Affiliates

(as shown in the Balance Sheets and Note 3 and Note 4 herein)

Due from/to Affiliates represents (i) receivables related to transactions among Debtors, Debtor-Controlled Entities and Non-Controlled Affiliates (separately or collectively, “Affiliates”), and (ii) payables by Debtor-Controlled Entities to Debtors and Non-Controlled Affiliates. Certain balances are reflected in “Due from” and “Due to” as a result of the assignments of claims against the Debtor and therefore are not netted.

Due from/to Affiliates are recorded in the Balance Sheets at book values, and where applicable, these balances are recorded net of cash distributions. The balances do not reflect potential realization or collectability reserves for Due from Affiliates balances nor estimates of potential additional payables to Affiliates. As a result, adjustments (including write-downs and write-offs) to Due from/to Affiliates, which are material, will be recorded in the future.


		Page 14

Quarterly Financial Report as of October 3, 2019 (Unaudited)

Note 2 – Other Receipts

The following table summarizes the main components of Other Receipts as of October 3, 2019:


	Debtors												Debtor- Controlled Entities		Total Debtors and Debtor- Controlled Entities
$ in millions	LBHI		LCPI		LBSF			Other Debtors			Total		Debtor- Controlled Entities		Total Debtors and Debtor- Controlled Entities
Affiliate Claims ⁽¹⁾		68		—		2			—			70		—		70
Other		1		—		(0	)		(0	)		1		6		7

Total Other Receipts		69		—		2			(0	)		71		6		77

Note: Totals may not foot due to rounding.

(1)

Includes $70 million of claims against Non-Controlled Affiliates acquired through settlements with third parties valued at estimated recoveries, net of distributions. The largest component of Affiliate Claims is an admitted claim, prior to distributions, against Lehman Brothers Limited for £66 million.


		Page 15

Quarterly Financial Report as of October 3, 2019 (Unaudited)

Note 3 – Due from/to Non-Controlled Affiliates

The following table presents, on an aggregate basis for Debtors and Debtor-Controlled Entities, admitted claims (including statutory interest to date), collections to date from Non-Controlled Affiliates, and aggregate estimated remaining recoveries (including statutory interest):


	Local Currency		Admitted Claims in Local Currency ⁽²⁾		Collections To Date in Local Currency ⁽²⁾			Admitted and Unsettled Filed Claims in USD ⁽³⁾		Collections To Date in USD ⁽²⁾			Net Receivables in USD		Estimated Recoveries ⁽⁴⁾
$ in millions	Local Currency		Admitted Claims in Local Currency ⁽²⁾		Collections To Date in Local Currency ⁽²⁾			Admitted and Unsettled Filed Claims in USD ⁽³⁾		Collections To Date in USD ⁽²⁾			Net Receivables in USD		LBHI		Other Debtors		Debtor- Controlled Entities		Total
Europe
Lehman Brothers Finance S.A.		CHF		10,153		(2,056	)		10,187		(2,058	)		8,128
LB UK RE Holdings Limited		GBP		1,188		(705	)		1,465		(869	)		596
Lehman Brothers International (Europe)		GBP		869		(869	)		1,168		(1,073	)		95
LB RE Financing No.3 Limited		GBP		353		(28	)		436		(34	)		401
Thayer Properties Limited		GBP		172		(82	)		212		(101	)		110
LB (PTG) Ltd		GBP		170		(91	)		209		(112	)		98
Lehman Brothers Holdings Plc		GBP		237		(236	)		293		(291	)		2
Longmeade Limited		GBP		43		(19	)		53		(24	)		29
Lehman Brothers Holdings Intermediate 2 Ltd		GBP		871		(871	)		1,778		(1,074	)		704
Other									959		(900	)		60
Recoveries of Prior Guarantee Distributions ⁽¹⁾									—		—			—

Total Europe									16,758		(6,537	)		10,222		305		0		803		1,108
Asia
LB Asia Pacific (Singapore) PTE		USD		621		(364	)		621		(364	)		258
LB Commercial Corp. Asia Limited		HKD		14,769		(9,036	)		1,883		(1,152	)		731
LB Investments PTE Ltd		USD		536		(335	)		536		(335	)		201
GKI Development Inc.		KRW		103,363		(91,427	)		86		(76	)		10
Lehman Brothers Australia Ltd		AUD		111		(66	)		75		(45	)		30
Sail Investor PTE Ltd		USD		63		(60	)		63		(60	)		3
Other									11,127		(10,894	)		233

Total Asia									14,393		(12,927	)		1,466		53		—		—		53

Total								$	31,151	$	(19,464	)	$	11,687	$	358	$	0	$	803	$	1,161

Totals may not foot due to rounding.

(1)	The Company’s Estimated Recoveries include estimates for recoveries related to prior distributions on Allowed Guarantee Claims against LBHI that are or are expected to be satisfied in full.

(2)	“Admitted Claims in Local Currency,” “Collections to Date in Local Currency” and “Collections to Date in USD” include statutory interest received to date less any distributions received on the claims prior to the assignments of the claims to LBHI and/or Debtor-Controlled Entities.

(3)	“Admitted and Unsettled Filed Claims in USD” includes estimated recoveries on subordinated receivables and statutory interest.

(4)	Refer to Note 1 – Basis of Presentation herein for further information on the estimated recoveries from Non-Controlled Affiliates.

(5)	Other claims against Lehman Brothers Finance S.A., Bankhaus, and LBIE acquired through settlements with third parties are included in Other Assets (refer to Note 2 – Other Receipts for additional information).


		Page 16

Quarterly Financial Report as of October 3, 2019 (Unaudited)

Note 3 – Due from/to Non-Controlled Affiliates (continued)

The table below presents the Due from/to Non-Controlled Affiliates balances as of October 3, 2019, and the related activity since the previously filed Quarterly Financial Report as of June 30, 2019:


	As of June 30, 2019			Activity 7/1/19 - 10/3/19												As of October 3, 2019
$ in millions	As of June 30, 2019			Cash Receipts			Cash Distributions			Claim Assignments ⁽¹⁾			Other ⁽²⁾			As of October 3, 2019
Due From Non-Controlled
Debtors:
Lehman Brothers Holdings Inc.	$	11,401		$	(225	)	$	—		$	17		$	(243	)	$	10,949
Lehman Commercial Paper Inc.		1			(0	)		—			—			(0	)		1
Lehman Brothers Special Financing Inc.		0			—			—			—			0			0
Other Debtors		(0	)		—			—			—			0			(0	)

Subtotal Debtors		11,401			(225	)		—			17			(243	)		10,950
Debtor-Controlled		766			—			—			(6	)		(22	)		737

Total Due From Controlled	$	12,167		$	(225	)	$	—		$	10		$	(265	)	$	11,687

Due To Non-Controlled ⁽³⁾
Debtors:
Lehman Brothers Holdings Inc.	$	29,076		$	—		$	(191	)	$	—		$	(0	)	$	28,885
Lehman Commercial Paper Inc.		438			—			(2	)		—			(1	)		435
Lehman Brothers Special Financing Inc.		773			—			(1	)		—			(1	)		772
Other Debtors		1			—			(1	)		—			(0	)		0

Subtotal Debtors		30,288			—			(194	)		—			(2	)		30,091
Debtor-Controlled		29			—			—			—			—			29

	$	30,316		$	—		$	(194	)	$	—		$	(2	)	$	30,120

(1)	Claim Assignments reflect a distribution in specie of certain Non-Controlled Affiliate entities to LBHI.

(2)	Other primarily includes the negative impact of movements in foreign exchange rates during the period of $262 million calculated on the historical net receivable balances.

(3)	“Due to Non-Controlled” balances from Debtors are included in Liabilties Subject to Compromise herein.


		Page 17

Quarterly Financial Report as of October 3, 2019 (Unaudited)

Note 3 – Due from/to Non-Controlled Affiliates (continued)

The following table presents a summary of Due from/to Non-Controlled Affiliates balances for Debtors as of October 3, 2019:


	LBHI						LBSF					LCPI					Other Debtors					Total Debtors
$ in millions	Due from			Due to			Due from		Due to			Due from		Due to			Due from		Due to			Due from			Due to
Europe
Lehman Brothers Treasury Co B.V. ⁽¹⁾	$	(0	)	$	(12,361	)	$	—	$	—		$	—	$	—		$	—	$	—		$	(0	)	$	(12,361	)
Lehman Brothers Finance S.A.		8,128			(671	)		—		—			—		—			—		—			8,128			(671	)
LB UK RE Holdings Limited		596			—			—		—			—		—			—		—			596			—
Thayer Properties Limited		110			—			—		—			—		(0	)		—		—			110			(0	)
LB (PTG) Ltd		98			—			—		—			—		—			—		—			98			—
Longmeade Limited		7			—			—		—			—		(23	)		—		—			7			(23	)
Lehman Brothers Limited		—			(232	)		—		(2	)		—		(1	)		—		(0	)		—			(235	)
Lehman Brothers International (Europe) ⁽²⁾		94			(651	)		—		(519	)		—		—			—		—			94			(1,169	)
Eldon Street Holdings Limited		—			(20	)		—		—			—		(0	)		—		(0	)		—			(20	)
LB RE Financing No.3 Limited		401			—			—		—			—		—			—		—			401			—
LB Holdings Intermediate 2 Ltd		—			(196	)		—		—			—		—			—		—			—			(196	)
Wood Street Investments Ltd		—			(174	)		—		—			—		—			—		—			—			(174	)
Storm Funding Ltd		0			(113	)		—		(3	)		—		(32	)		—		—			0			(148	)
Asia
LB Commercial Corp. Asia Limited		731			—			—		—			—		(1	)		—		—			731			(1	)
LB Asia Pacific (Singapore) PTE		258			—			—		—			—		—			—		—			258			—
LB Investments PTE Ltd		201			—			—		—			—		—			—		—			201			—
Other
Claims held by third parties ⁽³⁾		—			(14,369	)		—		(180	)		—		(377	)		—		0			—			(14,926	)
Other		325			(98	)		0		(67	)		1		(2	)		—		(0	)		326			(167	)

Total	$	10,949		$	(28,885	)	$	0	$	(772	)	$	1	$	(435	)	$	—	$	(0	)	$	10,950		$	(30,091	)

Totals may not foot due to rounding.

(1)	LBT is included in the defined term “Non-Controlled Affiliates,” but LBHI has no direct or indirect equity interest in LBT.

(2)	LBHI owns allowed claims against LBIE in the aggregate face amount of £644 million.

(3)	“Claims held by third parties” represent claims against Debtors, net of distributions, originally held by Non-Controlled Affiliates, according to their respective settlement agreements with the Company, that are currently held by third parties, including:


($ in millions)
Original creditor	LBHI			LBSF			LCPI			Total
Lehman Brothers Treasury CO BV	$	(6,600	)	$	—		$	—		$	(6,600	)
Lehman Brothers Bankhaus A.G.		(4,721	)		(102	)		(251	)		(5,074	)
Lehman Brothers Securities NV		(484	)		(43	)		—			(528	)
Storm Funding Ltd		(501	)		—			—			(501	)
LUK		(440	)								(440	)
LB Asia Capital Company		(391	)		—			—			(391	)
Eldon Street Holdings Limited		(385	)		—			—			(385	)
Lehman Re Limited		(274	)		(15	)		(86	)		(374	)
LB Securities Asia Limited		(124	)		—			—			(124	)
Lehman Brothers Asia Limited		(117	)		—			—			(117	)
Lehman Brothers Futures Asia Limited		(55	)		—			—			(55	)
Lehman Brothers Asia Holdings Limited		—			(20	)		(40	)		(60	)
LB (Luxembourg) Equity Finance S.A.		(85	)								(85	)
Lehman Brothers International (Europe)		(53	)								(53	)
Other		(138	)		—			—			(138	)

Total Claims held by third parties	$	(14,369	)	$	(180	)	$	(377	)	$	(14,926	)


		Page 18

Quarterly Financial Report as of October 3, 2019 (Unaudited)

Note 3 – Due from/to Non-Controlled Affiliates (continued)

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 a joint venture to facilitate the resolution of LBIE claims (the “Joint Venture”):

•

LBHI2 contributed to the Joint Venture its admitted senior claim of GBP 36.3 million (“Senior Claim”), subordinated claims of GBP 1.24 billion (“Sub Debt”), and an economic interest in its preferred equity (“Preferred Equity”) in LBIE.

•

The Funds paid approximately GBP 650 million to LBHI2 (by way of a capital contribution to the Joint Venture) and contributed to the Joint Venture the distributions on their claims against LBIE (approximately GBP 2.6 billion face as of January 31, 2014) in excess of the principal amount plus post-administration interest at 8% per year. LBHI2’s final recoveries and distributions will be determined following the resolution of the LBIE estate.

The Joint Venture includes a joint recovery pool governed by a specific sharing formula. Subject to certain adjustments, which could be material, all recoveries from the Sub Debt, Senior Claim, Preferred Equity, and the Funds’ contribution are split as follows:

(a)	100% to the Funds up to the Tier 1 Pool Threshold Amount;

(b)	For recoveries between the Tier 1 Pool Threshold Amount up to the Tier 2 Pool Threshold Amount, 70% to the Funds and 30% to LBHI2;

(c)	For recoveries between the Tier 2 Pool Threshold Amount up to the Tier 3 Pool Threshold Amount, 50% to the Funds and 50% to LBHI2; and

(d)	For recoveries above the Tier 3 Pool Threshold Amount, 25% to the Funds and 75% to LBHI2.

The “Tier 1 Pool Threshold Amount” is GBP 650 million. The “Tier 2 Pool Threshold Amount” is GBP 1.3 billion plus interest calculated at the simple rate of 2.25% from November 30, 2013 through September 3, 2018; thereafter, interest is calculated at

the simple rate of 1.25%. The “Tier 3 Pool Threshold Amount” is GBP 2.2 billion plus interest calculated at the simple rate of 4.25% from November 30, 2013 through September 3, 2018; thereafter, interest is calculated at the simple rate of 2.5%.

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.

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, Luxembourg Finance S.a.r.l. (“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.

Receivables from LBHI2:

•

SLP3 has receivables from LBHI2, which are contingent on the legal resolution of the relative ranking of sub-debt issued by LBHI2. As a result of estimated distributions to LBHI2 following the court sanction of the scheme of arrangement proposed by LBIE’s joint administrators, the Company has recorded an estimate of the recoveries on SLP3’s $6.139 billion subordinated receivables from LBHI2 (“SLP3 Sub Rec”).

•

Currently, LBHI is the indirect parent and the beneficiary of any proceeds paid pursuant to the SLP3 Sub Rec.

•

In addition, the Company has receivables from certain Non-Controlled Affiliates that have claims against LBHI2.


		Page 19

Quarterly Financial Report as of October 3, 2019 (Unaudited)

Note 4 – Due from/to Debtors and Debtor-Controlled Entities

The table below presents the Due from/to Debtors and Debtor-Controlled Entities balances as of October 3, 2019, and the related activity since the previously filed Quarterly Financial Report as of June 30, 2019:


			Activity 7/1/19 - 10/3/19
$ in millions	As of June 30, 2019		Cash Receipts			Cash Distributions			Claim Assignments		Other ⁽¹⁾			As of October 3, 2019
Due From Controlled
Debtors:
Lehman Brothers Holdings Inc.	$	18,980		(34	)	$	—		$	—	$	(53	)	$	18,892
Lehman Commercial Paper Inc.		6,685		(26	)		—			—		0			6,659
Lehman Brothers Special Financing Inc.		1,021		(7	)		—			—		(0	)		1,014
Other Debtors		0		—			—			—		(0	)		—

Subtotal Debtors		26,686		(67	)		—			—		(54	)		26,566
Debtor-Controlled		0										0			0

Total Due From Controlled	$	26,686	$	(67	)	$	—		$	—	$	(54	)	$	26,566

Due To Controlled ⁽²⁾
Debtors:
Lehman Brothers Holdings Inc.	$	3,815	$	—			(26	)		—	$	0		$	3,789
Lehman Commercial Paper Inc.		2,926		—			(14	)		—	$	(1	)		2,910
Lehman Brothers Special Financing Inc.		10,039		—			(8	)		—	$	(0	)		10,030
Other Debtors		0		—						—		(0	)		0

Subtotal Debtors		16,780		—			(49	)		—		(1	)		16,730
Debtor-Controlled		9,363					(10	)				(52	)		9,300

	$	26,143	$	—		$	(59	)	$	—	$	(54	)	$	26,030

(1)	Other includes debt forgiveness of $47 million related to the wind down of a Debtor-Controlled Entity.


		Page 20

Quarterly Financial Report as of October 3, 2019 (Unaudited)

Note 4 – Due from/to Debtors and Debtor-Controlled Entities (continued)

The following table presents a summary of Due from/to Debtors and Debtor-Controlled Entities balances for Debtors as of October 3, 2019:


	LBHI					LBSF					LCPI					Other Debtors						Total Debtors
$ in millions	Due from		Due to			Due from		Due to			Due from		Due to			Due from			Due to			Due from		Due to
Lehman Brothers Holdings Inc	$	—	$	—		$	828	$	(10,030	)	$	2,961	$	(2,733	)	$	—		$	(0	)	$	3,789	$	(12,763	)
LB Special Financing Inc		10,030		(828	)		—		—			0		(177	)		0			(0	)		10,030		(1,005	)
Lehman Commercial Paper Inc		2,733		(2,961	)		177		—			—		—			0			(0	)		2,910		(2,961	)
RACERS Claims ⁽¹⁾		536		—			—		—			—		—			—			—			536		—

Total Debtors	$	13,300	$	(3,789	)	$	1,005	$	(10,030	)	$	2,961	$	(2,910	)	$	0		$	(0	)	$	17,266	$	(16,730	)

Lehman Ali Inc:
Lehman Ali Inc (PCO)		—		—			—		—			1,928		—			—			—			1,928		—

LB I Group Inc:
LB I Group Inc (PCO)		1,520		—			6		—			43		—			—			—			1,569		—
LB Offshore Partners Ltd		339		—			—		—			1		—			(0	)		—			340		—
DL Mortgage Corp		—		(0	)		0		—			747		—			—			0			748		—

314 Commonwealth Ave Inc:
314 Commonwealth Ave Inc (PCO)		785		(0	)		—		—			—		—			—			0			785		—

Other:
Pami Ali LLC		1,754		0			1		—			980		—			—			(0	)		2,734		—
Real Estate Private Equity Inc		625		—			—		—			—		—			—			—			625		—
SMF No.1 Limited		123		—			—		—			—		—			—			—			123		—
Repe LBREP LP, LLC		184		—			—		—			—		—			—			—			184		—
Other		262		(0	)		1		—			—		—			(0	)		0			264		—

Total Debtor-Controlled Entities	$	5,593	$	(0	)	$	9	$	—		$	3,698	$	—		$	(0	)	$	0		$	9,300	$	—

Total	$	18,892	$	(3,789	)	$	1,014	$	(10,030	)	$	6,659	$	(2,910	)	$	0		$	(0	)	$	26,566	$	(16,730	)

“PCO” – parent company only

(1)	Refer to Section IV.I.b of the Disclosure Statement for further information on the RACERS Claims.


		Page 21

Quarterly Financial Report as of October 3, 2019 (Unaudited)

Note 4 – Due from/to Debtors and Debtor-Controlled Entities (continued)

The following table presents a summary of Due from/to Affiliates balances for Debtor-Controlled Entities as of October 3, 2019:


	Lehman ALI Inc.					LB I Group Inc.					314 Commonwealth Ave. Inc.						Other Debtor-Controlled Entities
$ in millions	Due from		Due to			Due from		Due to			Due from			Due to			Due from			Due to
Debtors:
Lehman Brothers Holdings Inc.	$	—	$	—		$	—	$	(1,860	)	$	—		$	(785	)	$	(0	)	$	(2,794	)
Lehman Commercial Paper Inc.		—		(1,928	)		—		(791	)		—			—			—			(980	)
Lehman Brothers Special Financing Inc.		—		—			—		(7	)		—			—			—			(1	)

Total Debtors	$	—	$	(1,928	)	$	—	$	(2,657	)	$	—		$	(785	)	$	(0	)	$	(3,774	)

Debtor-Controlled:
314 Commonwealth Ave Inc	$	45	$	—		$	—	$	—		$	—		$	—		$	—		$	—
Lehman Ali Inc ⁽¹⁾		—		—			—		—			—			(45	)		174			—
Real Estate Private Equity Inc ⁽¹⁾		—		—			—		—			—			—			217			(2	)
LB I Group Inc.		—		—			—		—			—			—			—			(319	)
Pami ALI LLC		—		(174	)		292		—			—			—			1			(217	)
Other		—		(0	)		28		(25	)		(0	)		0			2			(132	)

Total Debtor-Controlled Entities	$	45	$	(174	)	$	319	$	(25	)	$	(0	)	$	(45	)	$	393		$	(670	)

Total	$	45	$	(2,102	)	$	319	$	(2,682	)	$	(0	)	$	(830	)	$	393		$	(4,445	)

Non-Controlled Affiliates: ⁽²⁾
Lehman Brothers Holdings Intermediate 2 Ltd	$	—	$	—		$	—	$	—		$	—		$	—		$	704		$	—
LB UK RE Holdings Limited		—		—			—		—			—			—			—			—
Other		0		—			0		(1	)		—			—			31			(27	)

Total	$	0	$	—		$	0	$	(1	)	$	—		$	—		$	736		$	(27	)

(1)	“Due from” balances at Other Debtor-Controlled Entities are related to receivables recorded by Pami ALI LLC.

(2)

Certain “Due from” balances are recorded in the local currency of the respective Non-Controlled Affiliates and as a result, balances may fluctuate as a result of changes in foreign exchange rates. Due from/to Affiliates balances include both settled and unresolved balances with Non-Controlled Affiliates.


		Page 22

Quarterly Financial Report as of October 3, 2019 (Unaudited)

Note 5 – Disputed Claims

The table below presents the remaining Disputed Claims by Debtor, by Class and by Primary Obligor as of October 3, 2019:


					$ in millions
Debtor/Class	Total Number of Filed Claims		Number of Unliquidated Claims		Total Filed Amount		Estimate of Disputed Claims for Reserve Purposes ⁽²⁾		Total Cash Reserves for Disputed Claims ⁽³⁾
Lehman Brothers Holdings Inc.
Administrative		2		2	$	—	$	—	$	—
1 Priority Non-Tax		1		1		—		—		—
2 Secured		1		1		6		—		—

5 Senior Third-Party Guarantee ⁽¹⁾		2		—		8		5		0
LB UK Capital Funding II		1		—		0		0		0
LBIE		1		—		8		5		0

9A Third Party Guarantee other than of the RACERS Trusts ⁽¹⁾		69		4		1,124		859		30
LBIE		65		1		1,062		797		25
LBSF		3		3		—		—		—
LBF		1		—		62		62		5

Total – Lehman Brothers Holdings Inc.		75		8	$	1,138	$	865	$	30

Lehman Brothers Special Financing Inc.

4A General Unsecured Claims other than those of Designated Entities		3		3	$	—	$	—	$	—

Total – Lehman Brothers Special Financing Inc.		3		3	$	—	$	—	$	—

(1)	The Disputed Claims relate to asserted guarantee obligations related to the primary obligor.

(2)	Certain Claims have been estimated at less than filed amounts, for reserve purposes only, as agreed through stipulation or settlement agreement or pursuant to Court order. Unless otherwise agreed to or ordered by the Court, there is no reserve for unliquidated Claims.

(3)	In addition to cash, assets are being maintained as reserves for certain claims pursuant to agreements with creditors and/or Bankruptcy Court order.


		Page 23

Quarterly Financial Report as of October 3, 2019 (Unaudited)

Note 6 – Legal Proceedings

The Company is involved in or will be impacted by a number of judicial, regulatory and mediation proceedings concerning matters arising in connection with the bankruptcy proceedings and various other matters, including the proceedings listed below. The Company is unable at this time to determine the financial impact the Affirmative Litigations listed below may have on any potential recoveries or liabilities. As more information becomes available, the Company may record revisions, which may be material, in future Quarterly Financial Reports. (See Note 1—Basis of Presentation—Litigation for further discussion on the impact of these litigations on the cash flow estimates.)

Affirmative litigations:


Counterparty	Debtor(s)	Commenced	Court	Court Reference	Most Recent Disclosure
Mortgage Sellers	LBHI	Various	Various	Various	(a)

Bank of America National Association et al. (“SPV Avoidance Actions”)	LBSF	September 2010	Bankruptcy Court	10-03547 (SCC)	(b)

Ballyrock ABS CDO 2007-1 Limited Wells Fargo Bank N.A. (“Ballyrock Litigation”)	LBSF	February 2009	Bankruptcy Court	09-01032 (SCC)	March 31, 2012 Balance Sheets - Docket No. 29731

Other litigations:


Counterparty	Controlled Entities Party to Litigation	Debtor(s) Potentially Impacted by Litigation	Court	Most Recent Disclosure
PLC, LBHI2, LB GP No. 1 Ltd, Deutsche Bank (“ECAPs”)	LBHI SLP3	LBHI	UK Court	(c)

Guarantee Claims For Which LBIE Is The Primary Obligor	LBHI	LBHI	Bankruptcy Court	(d)

LBIE Other	None	LBHI	Various	(e)

LBF Guarantee – Tschira	None	LBHI	Swiss Court UK Court	(f)

LBF Guarantee – Enasarco	None	LBHI	Swiss Court	April 5, 2018 Balance Sheets - Docket No. 58442

Guarantee Clawbacks	LBHI	LBHI	Bankruptcy Court	(g)


		Page 24

Quarterly Financial Report as of October 3, 2019 (Unaudited)

Note 6 – Legal Proceedings (continued)

(a)

Mortgage Sellers

LBHI filed complaints in the Bankruptcy Court against 174 mortgage sellers seeking indemnification arising from the Allowed Claims of Fannie Mae, Freddie Mac and Private Label Trustees against LBHI for losses from defective loans purchased from LBHI. Three of those complaints were combined into one because two of the defendants were acquired by a third. 48 of the cases have been resolved and the corresponding complaints dismissed with prejudice. The remaining 124 cases are in the discovery phase pursuant to the Case Management Order [Docket No. 825 in Case No. 16-01019] entered on March 13, 2019.

Certain defendants filed a motion to dismiss the complaints on the basis that Lehman Brothers Bank, the original purchaser of the mortgage loans at issue, never effectuated the assignment of its indemnity rights to LBHI prior to the commencement of the chapter 11 cases and therefore, the Bankruptcy Court does not have subject matter jurisdiction over those cases. The moving defendants also seek dismissal on the basis that LBHI gave up its indemnity rights when it sold the loans to the Private Label Trusts. LBHI opposed the motion. The Bankruptcy Court heard argument on October 16, 2019 and reserved decision.

LBHI is also pursuing materially smaller claims against a significant number of mortgage sellers and brokers outside of the litigation, subject to the Amended Alternative Dispute Resolutions Procedures Order [Docket No. 59085 in Case No. 08-13555] entered by the Bankruptcy Court on November 18, 2018. As of January 10, 2020, LBHI has settled with 132 of these parties.

(b)

SPV Avoidance Actions

On January 24, 2017, the Bankruptcy Court ordered that its June 28, 2016 decision dismissing substantially all of LBSF’s claims be considered a Final Order for purposes of appeal. On February 6, 2017, LBSF filed its Notice of Appeal of the June 28, 2016 decision to the US District Court for the Southern District of New York. On February 27, 2017, the appeal was assigned to District Court Judge Lorna G. Schofield.

On March 14, 2018, Judge Schofield issued an order affirming the Bankruptcy Court’s determination in all respects. LBSF filed a notice of appeal to the Second Circuit Court of Appeals on April 13, 2018; LBSF’s appellate brief was filed on July 26, 2018. On June 26, 2019, the Second Circuit Court of Appeals heard oral argument on LBSF’s appeal and took the matter under advisement.

Refer to the filed Balance Sheets as of June 30, 2017 for previous disclosure.

(c)

ECAPs

Prior to the Commencement Date, the Company raised approximately $2 billion through the issuance in the UK of Enhanced Capital Advantaged Preferred Securities (“ECAPS”). The ECAPS were issued via five UK funding partnerships: Lehman Brothers UK Capital Funding LP, Lehman Brothers UK Capital Funding II LP and Lehman Brothers UK Capital Funding III LP, (“ECAPS I-III”), and Lehman Brothers UK Capital Funding IV LP and Lehman Brothers UK Capital Funding V LP.

Lehman Brothers Holdings PLC (“PLC”) has outstanding approximately €0.79 billion of subordinated notes issued to ECAPS I-III and approximately $1.9 billion of subordinated debt which is currently held by LBHI. LBHI2 has outstanding approximately $2.225 billion of subordinated debt issued to PLC and approximately $6.139 billion of subordinated notes which is currently held by Lehman Brothers Holdings Scottish LP 3.

On March 16, 2018, the Joint Administrators of PLC and LBHI2 each made an application to the High Court in England to seek, among other things, its determination of issues of priority in respect of potential distributions to the holders of the subordinated debts. The trial began on November 11 and concluded on November 22, 2019. The Court reserved decision and its ruling is pending.

For further information please refer to: www.pwc.co.uk/services/ business-recovery/administrations/non-lbie-companies/lbh-plc-in-administration.html and

www.pwc.co.uk/services/business-recovery/administrations/non-lbie-companies/lbhi2-limited-in-administration.html


		Page 25

Quarterly Financial Report as of October 3, 2019 (Unaudited)

Note 6 – Legal Proceedings (continued)

(d)

Guarantee Claims For Which LBIE Is The Primary Obligor

On July 10, 2018, LBHI filed a motion to have the Bankruptcy Court determine whether interest payments made by LBIE pursuant to its scheme should be counted as “consideration” by a Primary Obligor on the Primary Claims underlying the remaining Guarantee Claims held by affiliates of Deutsche Bank A.G. (“DB”) and Attestor Value Master Fund L.P. (“Attestor”) [ECF No. 58381]. On August 14, 2018, the Bankruptcy Court ruled that payments by LBIE were consideration such that DB’s and Attestor’s claims should be deemed satisfied in full. On August 20, 2018, both DB and Attestor filed notices of appeal to the District Court. On August 16, 2019, the District Court affirmed the Bankruptcy Court’s decision. On September 13 and 16, 2019, Attestor and DB filed an appeal to the United States Court of Appeals for the Second Circuit, which remains pending.

LBHI previously filed an objection to disallow six, LBIE-based, prime-brokerage-related Guarantee Claims seeking $118 million filed by funds related to Maverick Capital Ltd (“Maverick”) [ECF No. 53107]. On March 24, 2017, the Bankruptcy Court granted LBHI’s objection, disallowed Maverick’s claims, and ruled that Maverick could not amend its proofs of claim to assert direct (as opposed to guarantee) liability against LBHI [ECF No. 55346]. Maverick appealed that decision to the United States District Court for the Southern District of New York. On September 30, 2018, the District Court reversed the Bankruptcy Court’s decision that section 562 of the Bankruptcy Code and certain exculpatory clauses contained in the prime brokerage agreement at issue applied to Maverick’s claims, and remanded the case to the Bankruptcy Court for further proceedings. On July 3, 2019, LBHI filed a motion seeking to reduce Maverick’s claims to $4.3 million. On August 8, 2019, Maverick filed its opposition to that motion. On September 10, 2019, the Court heard argument on the Motion and reserved decision.

LBHI also previously filed an objection to disallow the LBIE-based Guarantee Claim filed by SRM Global Master Fund Limited Partnership (“SRM”) for $305 million [ECF No. 53215]. SRM filed a response [ECF No. 53250], LBHI filed a reply [ECF No. 53515], and on July 28, 2016, the Bankruptcy Court conducted a sufficiency hearing. The Bankruptcy Court directed the parties to a mediation, which occurred in February 2017, and failed to lead to a resolution. The Bankruptcy Court conducted a

status conference on October 23, 2017. On December 17, 2018, the Bankruptcy Court conducted a further conference and hearing on the Objection to Disallow the Claim. The Court ruled from the bench at the hearing that SRM’s Claim is disallowed in its entirety. On May 30, 2019, the Court issued its written decision disallowing SRM’s claim on multiple independent bases (the “SRM Decision”). On October 11, 2019, SRM withdrew its remaining claims that were not addressed in the SRM Decision [ECF No. 59979].

(e)

LBIE Other

The outcome of the following litigation may impact LBHI’s potential recoveries from LBIE:

AG Financial Products Inc.

On November 28, 2011, LBIE sued AG Financial Products Inc. (“AGR”), an affiliate of Assured Guaranty Corp., which in the past had provided credit protection to counterparties under credit default swaps. LBIE’s complaint, which was filed in the Supreme Court of the State of New York (the “New York Supreme Court”), alleged that AGR improperly terminated nine credit derivative transactions between LBIE and AGR and improperly calculated the termination payment in connection with the termination of 28 other credit derivative transactions between LBIE and AGR. LBIE asserted in the complaint that AGR owes LBIE a termination payment of approximately $1.4 billion.

On July 2, 2018, the New York Supreme Court dismissed LBIE’s allegation with respect to the breach of the implied covenant of good faith and fair dealing but found that there is a genuine question of fact as to the reasonableness and good faith of AGR’s calculation of its loss, and so LBIE may proceed with its claim against AGR for breach of contract. On July 31, 2018, AGR filed a Notice of Appeal with the New York State Appellate Division. On December 11, 2018, the Appellate Division heard oral arguments on the appeal. On January 17, 2019, the Appellate Division affirmed the Supreme Court’s decision in its entirety. The trial has been scheduled for March 9 through 20, 2020.

For further information please refer to: https://www.pwc.co.uk/services/ business-recovery/administrations/lehman/lehman-brothers-international-europe-in-administration-joint-administrators-nineteenth-progress-report-10-april-2018.html.


		Page 26

Quarterly Financial Report as of October 3, 2019 (Unaudited)

Note 6 – Legal Proceedings (continued)

(f)

LBF Guarantee - Tschira

Lehman Brothers Finance SA (“LBF”), an entity in which LBHI holds approximately 90% of the total admitted claims (the “LBHI-LBF Claims”), has been in ongoing litigation with two entities established by the late Klaus Tschira (we refer to the entities together as the “KT Entities”) regarding the valuation of terminated derivative transactions. LBF argued that the KT Entities collectively owe LBF €186 million plus interest. The KT Entities argued that LBF owes them €437 million.

In April 2013, LBF formally rejected the KT Entities’ claim in Switzerland, and the KT Entities subsequently objected. The litigation was ultimately decided in LBF’s favor (the KT Entities are not entitled to any claim in LBF’s bankruptcy) in a ruling released publicly in January 2019 by the Federal Supreme Court of Switzerland. In the decision, the Federal Supreme Court, the court of last resort in Switzerland, upheld the lower courts’ decisions and dismissed the appeal of the KT Entities in the bankruptcy proceedings of LBF. The KT Entities had objected to not being included in the schedule of allowed claims in the bankruptcy proceedings of LBF, despite having filed claims for the combined amount of approximately 664 million Swiss francs.

In August 2013, LBF commenced proceedings in the UK (as the derivatives transactions are governed by UK law) to pursue a recovery from the KT Entities, plus interest (the “UK Dispute”). In February 2019, the UK High Court (court of first instance) ruled that the KT Entities owed €77 million in contractual damages; a separate hearing on interest (“consequential matters”) will, absent settlement, be held at a later date.

On September 6, 2019, LBHI entered into an agreement (the “Participation Agreement”) with the KT Entities to sell a participation interest in the LBHI-LBF Claims pursuant to the terms and conditions set forth therein, and, on the same day, LBHI received approximately €164 million in accordance therewith. Pursuant to the terms of the Participation Agreement, upon receiving a subsequent distribution on October 25, 2019 from LBF representing a “Qualifying Payment,” LBHI then remitted to the KT Entities approximately €164 million, in full satisfaction of the Participation Agreement.

(g)

Guarantee Clawbacks

On April 30, 2019, LBHI filed an adversary proceeding in the Bankruptcy Court against Lehman Brothers Limited (in administration) (“LBL”), MBAM Investor Limited (“MBAM”), Eldon Street Holdings Limited (“ESH”) and Lehman Brothers Holdings Intermediate 2 Ltd. (“LBHI2”), seeking the return of $260 million in excess distributions on guarantee claims allowed against LBHI because, subsequent to LBHI’s payment of the distributions on such guarantee claims, the primary obligor fully satisfied the corresponding primary claim. On May 23, 2019, Deutsche Bank was permitted to intervene as a defendant by stipulation. On June 28, 2019, the defendants answered and denied the allegations in the complaint, and LBL, ESH, and LBHI2 each asserted a counterclaim that their guarantee claims had not yet been satisfied. MBAM did not initially assert a counterclaim, but subsequently amended its answer to counterclaim and interplead Lehman Brothers Holdings PLC. A status conference was held on July 18, 2019, during which the Court directed the parties to meet and confer in order to develop a set of stipulated facts and to determine the scope of discovery necessary for addressing disputed facts.


		Page 27

Quarterly Financial Report as of October 3, 2019 (Unaudited)

Note 7 – Taxes Payable

Taxes payable is an estimate of tax liabilities, net of the estimated impact of any refund claims, deposits and net operating losses (“NOL”). Taxes payable have been allocated among the members of the LBHI Tax Group pursuant to the Debtor Allocation Agreement (the “DAA”) (see below for further information).

As of October 3, 2019, the Company recorded an estimate of $41 million for potential pre- and post-petition amounts owed to federal, state, local and international taxing authorities, net of expected refund claims. Between June 20, 2019 and October 3, 2019, the Company decreased its taxes payable estimate by approximately $7 million as a result of continuous progress with global audits.

Debtor Allocation Agreement

The Debtor Allocation Agreement, which became effective on the Effective Date, addresses the relationship among the Debtors and certain Affiliates with respect to consolidated federal/combined state/local income taxes for pre-petition and post-petition years. Pursuant to the DAA, any tax receivables or payables related to pre-petition, consolidated group taxes, including the IRS refund, are treated as allowed pre-petition claims between LBHI and other Debtors and Debtor-Controlled Entities and subject to set-off or recoupment.

Net Operating Losses

The NOLs of the LBHI Tax Group (including Debtor-Controlled Entities) are subject to audit and adjustment by the IRS and primarily expire in or about 2028. Substantially all of the LBHI Tax Group’s current consolidated net operating loss carryovers are attributable to the Debtors. The Plan provides for an orderly liquidation of the Debtors. As previously disclosed in the Company’s Quarterly Financial Report as of March 31, 2012 [Docket No. 29731], the LBHI Tax Group received a private letter ruling from the IRS in connection with the Plan going effective that stated (i) the liquidation of the Debtors for U.S. federal income tax purposes may occur over an extended period, and (ii) the reduction of the LBHI Tax Group’s NOLs as a result of the discharge of debt pursuant to the Plan generally would not occur until completion of the liquidation. The Company has filed with the IRS a request for an extension of the ruling. All remaining Debtor NOLs not previously utilized to absorb taxable income of the LBHI Tax Group are expected to be fully utilized to offset the discharge of debt on the final date of liquidation of the Debtors.

Note 8 – Subsequent Events

Claims Consolidation Auction

On September 11, 2019, the Bankruptcy Court entered an order (Docket No. 59928) approving the Plan Administrator’s proposed Claims Consolidation Auction, in which LBHI as Plan Administrator would facilitate the voluntary sale and assignment of eligible claims against LBHI to third-party purchasers (“Sponsors”).

LBHI sent multiple notices to holders of claims eligible for participation in the Claims Consolidation Auction beginning September 30, 2019, and conducted a market-based auction process to solicit Sponsor bids in early November 2019. The selected Sponsors and rates were filed on November 8, 2019, and on November 12, 2019, the Court entered an order (Docket No. 60221) authorizing the Plan Administrator to effectuate the Claims Consolidation Auction.

In aggregate, 1,590 eligible creditors tendered 4,438 claims with an aggregate Allowed Amount of approximately $2.6 billion in the Claims Consolidation Auction. The total purchase price paid by the Sponsors was approximately $24 million.

Further information on the Claims Consolidation Auction can be found at https://dm.epiq11.com/lehman.

Sale of LCPI Assets to LBHI

On December 27, 2019, in order to facilitate the ultimate wind down of LCPI, LBHI and LCPI executed a sale and purchase agreement, pursuant to which LBHI agreed to purchase LCPI’s remaining assets and certain obligations for total consideration of $63.2 million. The purchase price was paid in January 2020.

The purchased assets include LCPI’s Allowed Claims into LBHI, the prices for which were determined by the Claims Consolidation Auction (see above).

Sale of Certain LBSF Assets to LBHI

On December 20, 2019, LBHI and LBSF executed a sale and purchase agreement, pursuant to which LBHI agreed to purchase LBSF’s Allowed Claims into LBHI for total consideration of $17.7 million. The prices for the Allowed Claims into LBHI were determined by the Claims Consolidation Auction (see above). The purchase price was paid in January 2020.


		Page 28

IV.

Balance Sheets

LEHMAN BROTHERS HOLDINGS INC. and Other Debtors and Debtor-Controlled Entities

Balance Sheets As of October 3, 2019

(Unaudited)


($ in millions)	Lehman Brothers Holdings Inc. 08-13555			Lehman Brothers Special Financing Inc. 08-13888			Lehman Commercial Paper Inc. 08-13900		BNC Mortgage LLC 09-10137		Lehman Brothers OTC Derivatives Inc. 08-13893			Total Debtor Entities (1)			Total Debtor- Controlled Entities (2)			Total Company
Assets
Cash and short-term investments	$	70		$	4		$	1	$	2	$	0		$	76		$	75		$	151
Cash and short-term investments pledged or restricted		154			10			5		0		0			170			14			183
Financial instruments and other inventory positions:
Commercial Real Estate		—			—			3		—		—			3			1			5
Residential Real Estate and Other		6			—			2		—		—			8			0			8
Principal investments		3			—			—		—		—			3			34			37
Derivative Receivables and Related Assets		—			11			—		—		—			11			—			11

Total Financial instruments and other inventory positions		9			11			5		—		—			25			36			61
Receivables from Debtors and Debtor-Controlled Entities and other assets		152			2			0		1		—			155			88			243
Investments in Affiliates		(27,788	)		—			1		—		—			(27,786	)		(19,401	)		(47,187	)
Due from Affiliates:
Debtors and Debtor- Controlled Entities		18,892			1,014			6,659		—		—			26,566			0			26,566
Non-Controlled Affiliates		10,949			0			1		—		—			10,950			737			11,687

Total Due from Affiliates		29,841			1,015			6,660		—		—			37,516			737			38,253

Total Assets	$	2,440		$	1,041		$	6,671	$	2	$	1		$	10,155		$	(18,451)		$	(8,296)

Liabilities and Stockholders’ Equity Liabilities
Payables to Debtors and Debtor-Controlled Entities and other liabilities	$	110		$	1		$	1	$	0	$	0		$	112		$	7		$	120
Due to Affiliates:
Debtor-Controlled Entities	$	0			—			—		—		—			0			9,300			9,300
Non-Controlled Affiliates		—			—			—		—		—			—			29			29

Total Due to Affiliates		0			—			—		—		—			0			9,329			9,329
Taxes Payable		34			—			5		—		—			39			2			41
Liabilities Subject to Compromise		135,306			22,704			4,404		—		(0	)		162,414			(0	)		162,414

Total Liabilities		135,449			22,704			4,411		0		0			162,565			9,338			171,903
Stockholders’ Equity		(133,010	)		(21,663	)		2,260		2		0			(152,410	)		(27,789	)		(180,199	)

Total Liabilities and Stockholders’ Equity	$	2,440		$	1,041		$	6,671	$	2	$	1		$	10,155		$	(18,451	)	$	(8,296	)

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 Debtor-Controlled Entities’ Balance Sheets are presented on page 30.


		Page 29

LEHMAN BROTHERS HOLDINGS INC. and Other Debtors and Debtor-Controlled Entities

Balance Sheets As of October 3, 2019 (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)			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	$	0		$	0	$	2		$	3	$	0	$	0		$	5		$	1	$	63		$	—		$	75
Cash and short-term investments pledged or restricted		(0	)		0		3			—		—		—			—			—		11			—			14
Financial instruments and other inventory positions:
Commercial Real Estate		—			1		—			—		—		—			(0	)		—		0			—			1
Residential Real Estate and Other		—			0		0			—		—		—			—			—		—			—			0
Principal investments		0			—		13			—		—		—			0			—		21			—			34
Derivative Receivables and Related Assets		—			—		—			—		—		—			—			—		—			—			—

Total Financial instruments and other inventory positions		0			1		13			—		—		—			0			—		21			—			36
Receivables from Debtors and Debtor-Controlled Entities and other assets		0			0		2			69		0		2			0			—		29			(14	)		88
Investments in Affiliates		(25,186	)		—		—			2		—		0			—			—		0			5,784			(19,401	)
Due from Affiliates:
Debtors and Debtor- Controlled Entities		45			—		319			—		—		(0	)		390			—		3			(758	)		0
Non-Controlled Affiliates		0			—		0			—		1		—			22			—		714			—			737

Total Due from Affiliates		45			—		319			—		1		(0	)		412			—		717			(758	)		737

Total Assets	$	(25,141	)	$	1	$	339		$	75	$	1	$	2		$	418		$	1	$	841		$	5,012		$	(18,451	)

Liabilities and Stockholders’ Equity Liabilities
Payables to Debtors and Debtor-Controlled Entities and other liabilities	$	0		$	0	$	0		$	0	$	0	$	0		$	0		$	0	$	220		$	(213	)	$	7
Due to Affiliates:
Debtor-Controlled Entities		2,102			—		2,682			—		—		830			3,028			—		1,417			(758	)		9,300
Non-Controlled Affiliates		—			—		1			—		—		—			—			—		27			—			29

Total Due to Affiliates		2,102			—		2,683			—		—		830			3,028			—		1,444			(758	)		9,329
Taxes Payable		—			—		2			—		—		—			—			—		—			—			2
Liabilities Subject to Compromise		—			—		—			—		—		—			—			—		(0	)		—			(0	)

Total Liabilities		2,102			0		2,685			0		0		830			3,028			0		1,664			(971	)		9,338
Stockholders’ Equity		(27,243	)		1		(2,346	)		75		1		(829	)		(2,610	)		1		(822	)		5,983			(27,789	)

Total Liabilities and Stockholders’ Equity	$	(25,141	)	$	1	$	339		$	75	$	1	$	2		$	418		$	1	$	841		$	5,012		$	(18,451	)

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 (i) separately reported wholly-owned subsidiaries that are Debtor entities (e.g. LCPI,and LBSF) and (ii) separately reported Debtor-Controlled Entities and their direct subsidiaries (e.g. 314 Commonwealth Ave Inc., Property Asset Management Inc. and Pami ALI LLC).

(3)	Entities are reflected on a consolidated basis.


		Page 30

LEHMAN BROTHERS HOLDINGS INC. PLAN TRUST - FORM 8-K - EX-99.1 - January 13, 2020

Attached files