Lehman Brothers Holdings on Sunday filed for bankruptcy protection as it emerged that Japanese banks were the US group’s top unsecured lenders and authorities in Tokyo have ordered Lehman’s Japanese subsidiary to retain assets in the country.
The collapse of the 158-year-old Wall Street institution will cause thousands of job losses among the investment bank’s 25,000-strong staff.
The petition for bankruptcy protection does not include Lehman’s broker-dealer operations and other divisions, including Neuberger Berman, the asset manager.
This signals that the bank is either in talks to find buyers for the operations or is planning to unwind the businesses gradually.
The Chapter 11 filing reveals that Japan’s Aozora is owed $463m in unsecured bank loans, more so than any other banks, while Mizuho is in second place with $289m owed.
Aozora is controlled by the US private equity group Cerberus. In August, it had to revise its profit downward to take into account a loss from its investment in GMAC, the US financial services group.
The Financial Services Agency in Japan issued the order to Lehman on Monday. A spokesman told Bloomberg: “We are in contact and co-operation with overseas regulators including those in the US ... We are currently gathering information and working to understand the situation.”
Citibank and The Bank of New York Mellon Corporation are listed as the largest unsecured bondholders because of their roles as trustees for certain Lehman bond offerings, with a combined exposure of around $138bn.
The Bank of New York Mellon issued a statement on Tuesday clarifying that it has no outstanding loans to Lehman and in its role as trustee, the bank merely facilitates the payment of interest and principal.
PricewaterhouseCoopers has begun the process of winding down Lehman’s European units on Monday morning.
| Q2 2008 (€ m) | 2007 (€ m) | |
|---|---|---|
| Société Générale | 473,329 | 487,959 |
| Credit Agricole | 383,995 | 364,178 |
| BNP Paribas | NA | 597,578 |
| Natixis | NA | 202,928 |
| Barclays | 460,423 | 352,133 |
| Deutsche Bank | 1,138,090 | 1,193,131 |
| Credit Suisse | 277,362 | 331,807 |
| UBS | 652,972 | 757,271 |
| * European banks - outstanding trading positions with Lehman Source: JPMorgan estimates, Company data | ||
The London Financial Services Authority said in a statement: “Lehman Brothers is a US institution regulated by the [Securities and Exchange Commission], so the FSA is working closely with the US authorities to ensure an orderly wind down of its principal UK trading subsidiary, Lehman Brothers International (Europe), which was placed into administration earlier this morning.”
“The FSA is working with market practitioners, including the London Clearing House, to ensure the process connected with the winding down of this wholesale business is completed in an orderly manner to minimise any market disruption.”
Germany’s regulator BaFin imposed a so-called moratorium on Lehman’s unit in the country, an order aimed at preserving its remaining assets.
