LEHMAN Brothers Holdings Inc, the US investment bank that filed the largest bankruptcy in history, won federal court approval to sell its North American business to London-based Barclays Plc for $1.75 billion.
US bankruptcy judge James Peck in Manhattan overruled objections from Lehman creditors who said the sale was moving too quickly, setting the stage for Barclays, the UK’s third-biggest bank, to close the deal over the weekend. Peck said it was clear no other purchaser would emerge if he delayed the sale, and that the deal would help stabilise global financial markets.
“I need to approve this transaction, because it’s the only available transaction,” Peck said. “Lehman Brothers became a victim — in effect the only true icon — to fall in the tsunami that has befallen the credit markets, and it saddens me.”
Barclays president Robert Diamond called it the deal of a “lifetime” when the bank acquiredLehman’sNorthAmericaninvestment banking arm on September 17, two days after Lehman collapsed. Barclays may add other parts of the failed investment bank to help it boost equity and advisory units in Europe and Asia, Diamond told analysts at the time. The courtroom broke into applause when the hearing closed at 12:41 am New York time.
“This week, more than any other week, I have felt the awesome power of this job,” Peck said. “This is the most momentous bankruptcy hearing I’ve ever sat through — either as a lawyer or a judge.” Lehman attorney Harvey Miller of Weil Gotshal & Manges said a rejection of the deal would have caused a “major shock to the financial system.” Miller previously said there were accounts with a total value of about $138 billion dependent on the sale.
Lehman is selling off pieces that weren’t included in the New York-based holding company’s bankruptcy filing. The Securities Investor Protection Corp. began a liquidation proceeding for the brokerage and appointed a trustee who must also approve the sale. The SIPC is an insurance fund created under federal law and financed by brokerages.
Hedge fund Harbinger Capital Partners had asked the judge to block the sale unless Lehman immediately disclosed cash transfers it made just prior to its bankruptcy, including an alleged $5 billion transfer of cash from Lehman’s London office. Another two hedge funds, Bay Harbour Management LC and Amber Capital, filed papers alleging $8 billion was moved.
Regulators including the US Securities and Exchange Commission and the Federal Reserve Bank of New York favoured the deal. Some creditors argued the sale should have been delayed to seek a better deal for Lehman’s assets amid a government plan to purge banks of bad assets and crack down on speculators who drove down shares of financial companies. “This is Friday; the case was filed on Monday. What we’re doing is unheard of,” Peck said when approving the sale. “It’s an extraordinary example of the flexibility that bankruptcy affords.”
SOURCE: ECONOMIC TIMES
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