Lehman Brothers — Corporate Update (November 2009)
40 slides from Lehman Brothers's corporate update, Nov 18, 2009
Slide 1: Lehman Brothers Holdings Inc. The State of the Estate
LEADERSHIP • PROBLEM SOLVING • VALUE CREATION Lehman Brothers Holdings Inc. The State of the Estate November 18, 2009 © Copyright 2009. Alvarez & Marsal Holdings, LLC. All Rights Reserved.
Slide 2: The information and data included in this Report are derived from sources available to
The information and data included in this Report are derived from sources available to Lehman Brothers Holdings Inc. and its other subsidiaries that have filed proceedings under Chapter 11 of the Bankruptcy Code (collectively, the "Debtors"). The Debtors have prepared this presentation based on the
Slide 3: Contents
Contents I. Executive Summary II. Financial A. Cash Position B. Cash Flow C. Finance and Accounting D. IT Migration Update 2 III. Asset Management Updates A. Loan Book B. Bank Platforms C. Private Equity / Principal Investments D. Real Estate Assets E. Derivatives Book F. Summary of Unfunded Commitm
Slide 4: Contents (continued)
Contents (continued) IV. Claims Management Report A. Filed Claims Overview B. Selected Filed Claims Detail C. Reconciliation Efforts D. Next Steps V. Key Litigation Update 3 A. Bank of America Matter B. Barclays Matter VI. Plan of Reorganization Status A. Issue of Substantive Consolidation B. Target
Slide 5: I. Executive Summary
I. Executive Summary Overall • Situation is stable with good progress on all fronts • Broader market is seeing a slight easing of liquidity but financing for buyers remains limited • Bar date has passed and claims picture is coming into focus • Key challenges are the resolution of intercompany issue
Slide 6: I. Executive Summary (continued): Asset Management
I. Executive Summary (continued) Asset Management • Illiquid assets are being managed for reasonable disposition in an improving market • Modest appreciation in the illiquid assets appears likely • Contingent assets (litigation claims) are being pursued, including in the case of Bank of America and
Slide 7: I. Executive Summary (continued): Liability Management
I. Executive Summary (continued) Liability Management • The respective bar dates have passed and, to date, in excess of 64,000 claims with a face amount of $820 billion have been filed in various priorities against the various Debtors. This dollar amount does not include claims that are unliquidated
Slide 8: I. Executive Summary (continued): Case Administration
I. Executive Summary (continued) Case Administration • Financial reporting is improving and becoming more current (June 30, 2009 balance sheet is expected week of November 30, 2009) • Cooperation with the Examiner continues and expect that the Examiner will submit a report by February 1, 2010 which
Slide 9: II. Financial
II. Financial A. Cash Position B. Cash Flow C. Finance and Accounting D. IT Migration Update 8
Slide 10: Current Cash and Investment Position
A. Current Cash and Investment Position (a) II. Financial – Cash Position ($ in millions) Filing Segregated / Date Date General Identified Total Filed Balance Funds Funds (e) Funds (f) Debtor Entities (20 Entities) (b) Lehman Brothers Holdings Inc. 9/15/08 1,148 $ (c) 2,296 $ 255 $ 2,550 $ LB Specia
Slide 11: Cash Flow Activities – LBHI (Americas)
B. Cash Flow Activities – LBHI (Americas) (a) II. Financial – Cash Flow ($ in millions) Filing Date Filing Date thru thru 9/30/09 1/2/09 YTD'09 Comments (YTD'09) Receipts Asset Sales 1,831 $ 1,667 $ 164 $ R3 Promissory Note $126M, Aircraft sales $24M, and Other $14M Receipts from Subsidiaries 965 14
Slide 12: C. Finance and Accounting
C. Finance and Accounting • Payroll and non-payroll cost allocation for Q3 ’09 from LBHI to subsidiary estates is targeted for completion by end of November 2009 • Current on monthly filings of cash receipts and disbursements plus professional fee and expense disbursements • June 30, 2009 balance sh
Slide 13: D. IT Migration Update
D. IT Migration Update • Overall migration of IT from Barclays is on schedule • Targeted completion date of IT migration; March 31, 2010 • Barclays annual cost of approximately $58 million per annum for IT services will be reduced to an estimated $22 million per annum when the migration is completed
Slide 14: III. Asset Management Updates
III. Asset Management Updates A. Loan Book B. Bank Platforms C. Private Equity / Principal Investments D. Real Estate Assets 13 E. Derivatives Book F. Summary of Unfunded Commitments
Slide 15: A. Loan Book Highlights
III. Asset Management Updates (continued) A. Loan Book Highlights • Unfunded Credit Exposure – $31 billion at September 14, 2008 reduced to $11 billion at September 30, 2009 terminated at a cost of $33 million • Open Loan Trades – 96% of Open Trades were closed generating $433 million in proceeds 14
Slide 16: A. Loan Book: Commercial Loan Portfolio Summary
III. Asset Management Updates (continued) A. Loan Book (continued) Commercial Loan Portfolio Summary by legal entity (September 30, 2009) ($ in millions at nominal value) Committed Funded All Segments Total Retained Pledged (a) Total Retained Pledged (a) Debtor Entities Lehman Brothers Holdings Inc.
Slide 17: B. Bank Platforms – Woodlands Bank Highlights
III. Asset Management Updates (continued) B. Bank Platforms – Woodlands Bank Highlights • SIPA Trustee has acknowledged customer claim of $534 million Muni bond claim (its inclusion would further bolster RBC Ratio) • Regulators originally committed to re-open brokered CD market if RBC Ratio exceeds
Slide 18: B. Bank Platforms – Woodlands Bank (continued)
III. Asset Management Updates (continued) B. Bank Platforms – Woodlands Bank (continued) ($ in millions) 12/31/08 3/31/09 6/30/09 9/30/09 Assets 5,326 $ 4,876 $ 4,580 $ 3,592 $ Liabilities 4,929 $ 4,309 $ 3,952 $ 2,947 $ Equity 397 $ 567 $ 628 $ 645 $ 17 RBC Ratio 5.1% 9.2% 14.1% 17.1%
Slide 19: B. Bank Platforms – Aurora Bank Highlights
III. Asset Management Updates (continued) B. Bank Platforms – Aurora Bank Highlights • Represents a viable mortgage servicing entity that supports over $113 billion in residential mortgages • Mismatch of brokered deposit runoffs and asset liquidations has stressed liquidity from time to time 18 • Re
Slide 20: B. Bank Platforms – Aurora Bank (continued)
III. Asset Management Updates (continued) B. Bank Platforms – Aurora Bank (continued) ($ in millions) 12/31/08 3/31/09 6/30/09 9/30/09 Assets 6,514 $ 5,694 $ 5,381 $ 4,811 $ Liabilities 6,046 $ 5,102 $ 4,806 $ 4,366 $ 19 Equity 467 $ 592 $ 575 $ 445 $ RBC Ratio 5.9% 10.3% 11.1% 9.4%
Slide 21: C. Private Equity / Principal Investments Highlights
III. Asset Management Updates (continued) C. Private Equity / Principal Investments Highlights • Continue to manage and dispose of investments in an orderly and reasonable fashion despite an illiquid market • Significant headway on reducing unfunded commitment exposure from $4 billion at September 1
Slide 22: C. Private Equity / Principal Investments (continued)
III. Asset Management Updates (continued) C. Private Equity / Principal Investments (continued) ($ in millions) 9/15/08 - 6/30/09 Pre- Cash From Carrying Activity # of Petition Transfers / Sales / Additional Market Value 7/1/09 - Category Investments 9/14/08 Reclasses (a) Redemp. Investments Change
Slide 23: C. Private Equity / Principal Investments: Breakdown by Legal Entity
III. Asset Management Updates (continued) C. Private Equity / Principal Investments (continued) The table below provides a break down by legal entity ($ in millions) Carrying Value as of 6/30/09 (a) Asia Asia Investments Private Investments Total (Controlled Equity Direct GP / LP (Controlled Structu
Slide 24: D. Real Estate Assets Highlights
III. Asset Management Updates (continued) D. Real Estate Assets Highlights • Significant number of restructurings in progress often resulting in LBHI ownership • Lehman real estate team re-tooling from lender to asset manager – Hired 10 asset managers in last 90 days • Unfunded commercial real estat
Slide 25: D. Real Estate Assets: Portfolio Summary
III. Asset Management Updates (continued) D. Real Estate Assets (continued) The table below provides a summary of the approximately $14 billion portfolio of real estate managed by the LBHI estate (a) (b) ($ in millions) 9/15/08 - 6/30/09 Pre- Market Value Carrying Activity Petition Change / Value 7/
Slide 26: D. Real Estate Assets: Breakdown by Legal Entity
III. Asset Management Updates (continued) D. Real Estate Assets (continued) • The table below provides a break down by legal entity ($ in millions) As of 6/30/09 (a) Commercial North America Legal Entity Pledged (b) Unpledged Europe/Asia Residential Total Debtor Entities Lehman Brothers Holdings Inc
Slide 27: E. Derivatives Book
III. Asset Management Updates (continued) E. Derivatives Book • Highlights • Collected approximately $8 billion cash through November 6, 2009 • Traction on strategic fronts – Alternate Dispute Resolution (Mediation) process approved by Court – Hedging capability enhanced via ISDAs with key dealers (
Slide 28: E. Derivatives Book: Cash Collections
E. Derivatives Book (continued) • Cash Collections III. Asset Management Updates (continued) $5,815 $8,023 6,000 7,000 8,000 9,000 ($ in millions) 27 $4,002 $2,208 $1,813 0 1,000 2,000 3,000 4,000 5,000 Jan 29, 2009 341 Meeting Jul 8, 2009 341 Meeting As of Nov 6, 2009
Slide 29: E. Derivatives Book: Resolution Process Update
6,355 61% 5,000 6,000 7,000 (# of Contracts) III. Asset Management Updates (continued) E. Derivatives Book (continued) • Resolution Process Update July 31, 2009 September 16, 2009 November 5, 2009 3,394 3,898 3,148 694 407 2,197 1,108 2,815 2,857 11% of total 35% of total 45% of total 53% of total o
Slide 30: F. Summary of Unfunded Commitments
III. Asset Management Updates (continued) F. Summary of Unfunded Commitments • Significant reduction – $24 billion of commitments ($ in millions) Reduction Asset Team 9/15/08 9/30/09 % to Date Loan Book / Bank Platforms 31,122 $ 10,664 $ (65.7%) Private Equity / Principal Investments 4,421 1,918 (56
Slide 31: IV. Claims Management Report
IV. Claims Management Report A. Filed Claims Overview B. Selected Filed Claims Detail C. Reconciliation Efforts D. Next Steps 30
Slide 32: A. Filed Claims Overview
IV. Claims Management Report (continued) A. Filed Claims Overview • Over 64,000 claims have been filed with a face amount in excess of $820 billion • Over 7,200 guarantee claims have been filed • 77% of claims and 81% of face amount of claims have been filed against LBHI • 98% of the face amount of
Slide 33: B. Selected Filed Claims Detail: by Debtor
IV. Claims Management Report (continued) B. Selected Filed Claims Detail • Claim Detail by Debtor ($ in billions) Claim Volume Claim Dollars Debtor Entities # % $ % Top 5 Debtor Entities Lehman Brothers Holdings Inc. 49,662 77% 666 $ 81% LB Special Financing 3,222 5% 88 11% 32 Structured Asset Secur
Slide 34: B. Selected Filed Claims Detail: by Type
IV. Claims Management Report (continued) B. Selected Filed Claims Detail (continued) • Claim Detail by Type ($ in billions) Claim Volume Claim Dollars Claim Type # % $ % Top 5 Claim Types Guarantee of a Debtor 7,265 11% 374 $ 45% Derivative Contract / ISDA Master Agreement 4,077 6% 111 13% 33 Subord
Slide 35: C. Reconciliation Efforts
IV. Claims Management Report (continued) C. Reconciliation Efforts • Significant efforts to (1) identify claims subject to a non-substantive objection (amended, duplicative, etc.) and (2) properly categorize the remaining claims for substantive review • Preparation of both a procedural motion to add
Slide 36: D. Next Steps
IV. Claims Management Report (continued) D. Next Steps • The Debtors are cognizant of the number of complex claims that have been filed and that will require third party intervention to resolve and have under consideration alternative dispute resolutions as initial option to judicial proceedings • B
Slide 37: V. Key Litigation Update
V. Key Litigation Update A. Bank of America Matter B. Barclays Matter 36
Slide 38: A. Bank of America Matter
V. Key Litigation Update (continued) A. Bank of America Matter • Cross motions for summary judgments filed • Fully briefed and court will hear on December 10, 2009 37
Slide 39: VI. Plan of Reorganization Status
VI. Plan of Reorganization Status A. Issue of Substantive Consolidation • Issue is being intensively studied and any recommendation or action pursued will be the result of deep consideration and carefully deliberated judgment B. Target End of Q1 ’10 Plan of Reorganization Outline 39
Slide 40: VII. Key Challenges
VII. Key Challenges (A) Intercompany Transparency – despite the passage of one year since the filing we do not have access to transaction activity at LBI or at our clearing banks (B) A significant number of primary claim legal issues will confront the Estate in 2010. Problem is compounded by numerou
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