By Eric Morath
Of DOW JONES DAILY BANKRUPTCY REVIEW
Lehman Brothers Holdings Inc. (LEHMQ) struck a deal with WCAS
Fraser Sullivan Investment Management LLC that will allow the
failed investment bank to turn its $5.3 billion commercial-loan
portfolio into cash.
The deal, filed with the U.S. Bankruptcy Court in Manhattan
Wednesday afternoon, allows Lehman to more quickly monetize one of
its largest assets, its commercial-loan portfolio, rather than
selling the loans at depressed prices or waiting for them to
mature. Some 30% of those loans don't mature until 2016 or
later.
Lehman reached an asset-management agreement with Fraser
Sullivan Tuesday that calls for the firm to assist in transferring
part of the portfolio to collateralized loan obligations, or CLOs,
and manage the remaining portion of the portfolio that is not
eligible to be included in such securitizations, court papers
said.
The proposal, which is subject to court approval, would bring
between $1.6 billion and $2.0 billion in cash into the Lehman
estate following the sale of securities by the CLO issuers.
"This is a great outcome for the estate," said Doug Lambert,
chief executive of Lamco, the asset-management unit Lehman spun out
of its bankruptcy case.
"Not only does this agreement with Fraser Sullivan ensure
maximization of recovery value from our loan portfolio over the
long term, but it also provides continuity of management who are
aligned with the estate's mission to deliver that value back to
creditors," he said in an email.
Lambert is also a managing director with restructuring advisor
Alvarez & Marsal.
According to court papers, certain employees of Lamco, who had
been overseeing the commercial portfolio, will move to Fraser
Sullivan.
A hearing on the matter is set for Aug. 17.
The commercial portfolio includes loans from 157 issuers with an
outstanding principal balance of $3.8 billion and unfunded
commitments of about $1.5 billion.
(Dow Jones Daily Bankruptcy Review covers news about distressed
companies and those under bankruptcy protection.)
-By Eric Morath, Dow Jones Daily Bankruptcy Review;
202-862-9279; eric.morath@dowjones.com