================================================================= LEHMAN BROTHERS BANKRUPTCY NEWS Issue Number 1 ----------------------------------------------------------------- Copyright 2008 (ISSN XXXX-XXXX) September 15, 2008 ----------------------------------------------------------------- Bankruptcy Creditors' Service, Inc. 215-945-7000 FAX 215-945-7001 ----------------------------------------------------------------- LEHMAN BROTHERS BANKRUPTCY NEWS is published by Bankruptcy Creditors' Service, Inc., 572 Fernwood Lane, Fairless Hills, Pennsylvania 19030, on an ad hoc basis (generally every 10 to 20 days) as significant activity occurs in the Debtor's cases. New issues are prepared by Randy T. Antoni, Psyche S. Castillon, Carlo B. Fernandez, Frauline S. Abangan and Peter A. Chapman, Editors. Subscription rate is US$45 per issue. Any re-mailing of LEHMAN BROTHERS BANKRUPTCY NEWS is prohibited. ================================================================= IN THIS ISSUE ------------- [00000] HOW TO SUBSCRIBE TO LEHMAN BROTHERS BANKRUPTCY NEWS [00001] BACKGROUND & DESCRIPTION OF LEHMAN BROTHERS [00002] COMPANY'S BALANCE SHEET AS OF MAY 31, 2008 [00003] COMPANY'S PRESS RELEASE ANNOUNCING CHAPTER 11 FILING [00004] LEHMAN'S CHAPTER 11 DATABASE [00005] LIST OF 30 LARGEST UNSECURED CREDITORS [00006] LEHMAN BROTHERS INTERNATIONAL (EUROPE) IN ADMINISTRATION [00007] DEBTOR'S MOTION TO ENFORCE AUTOMATIC STAY ON CREDITORS [00008] MOODY'S CUTS LEHMAN'S RATINGS & INITIATES REVIEW [00009] FITCH DOWNGRADES LEHMAN TO 'D' ON BANKRUPTCY FILING KEY DATE CALENDAR ----------------- 09/15/08 Voluntary Petition Date 09/30/08 Deadline to File Schedules of Assets and Liabilities 09/30/08 Deadline to File Statement of Financial Affairs 09/30/08 Deadline to File Lists of Contracts and Leases 10/15/08 Deadline to Provide Utilities with Adequate Assurance 12/14/08 Deadline to Remove Actions Pursuant to F.R.B.P. 9027 01/13/09 Expiration of Debtor's Exclusive Plan Proposal Period 01/13/09 Deadline to Make Decisions About Lease Dispositions 03/14/09 Expiration of Debtor's Exclusive Solicitation Period 09/15/10 Deadline for Debtor's Commencement of Avoidance Actions Organizational Meeting to Form Creditors' Committees First Meeting of Creditors under 11 USC Sec. 341 Bar Date for filing Proofs of Claim ----------------------------------------------------------------- [00000] HOW TO SUBSCRIBE TO LEHMAN BROTHERS BANKRUPTCY NEWS ----------------------------------------------------------------- LEHMAN BROTHERS BANKRUPTCY NEWS is distributed to paying subscribers by electronic mail. New issues are published on an ad hoc basis as significant activity occurs (generally every 10 to 20 days) in the Debtor's cases. The subscription rate is US$45 per issue. Newsletters are delivered via e-mail; invoices, transmitted following publication of each newsletter issue, arrive by fax. Re-mailing of LEHMAN BROTHERS BANKRUPTCY NEWS is prohibited. Distribution to multiple individuals at the same firm is provided at no additional charge; folks outside of your firm should set-up and pay for their own subscriptions. Subscriptions may be canceled at any time without further obligation. 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Currently, we provide similar coverage about the restructuring proceedings involving Bear Stearns Co.'s High- Grade Structured Credit Strategies Master Fund, Ltd., and High- Grade Structured Credit Strategies Enhanced Leverage Master Fund, Ltd., Canadian ABCP Trusts, Refco, Inc., Cadence Innovation LLC, Progressive Molded Products, Inc., BHM Technologies Holdings, Inc., Delphi Corp., Plastech Engineered Products, Inc., Blue Water Automotive Systems, Inc., Dana Corp., Meridian Automotive Systems, Inc., Tower Automotive Inc., Boscov's Department Store, LLC, Mervyn's LLC, Steve & Barry's Manhattan, LLC, Kmart Corp., Linens 'n Things, Inc., Hancock Fabrics, Inc., Sharper Image Corp., Movie Gallery, Inc., Tweeter Home Entertainment Group, Inc., SemGroup L.P., Enron Corp., Calpine Corporation, Mirant Corp., Vertis Holdings, Inc., American Color Graphics, Inc., Quebecor World, Inc., Tricom, S.A., Adelphia Communications and Adelphia Business Solutions, Winstar Communications, Werner Holding Co. (DE), Inc., SIRVA, Inc., Sea Containers, Ltd., Allied Holdings, Performance Transportation Services, Frontier Airlines Holdings, Inc., ATA Airlines, Inc., Delta Air Lines, Northwest Airlines, US Airways, UAL Corporation and United Airlines, Mesaba Aviation, LandSource Communities Development LLC, Kimball Hill, Inc.,TOUSA, Inc., Levitt and Sons LLC, Neumann Homes, Inc., American Home Mortgage Investment Corp., New Century Financial Corp., Delta Financial Corporation, HomeBanc Corp., Mortgage Lenders Network USA, Inc., The Education Resources Institute, Inc., Vesta Insurance Group, Inc., and its six insurance units, National Century Financial Enterprises, Greektown Holdings, LLC, Tropicana Entertainment, LLC, PRC, LLC, Wellman Inc., Propex Inc., Solutia, Inc., Exide Technologies, Bennigan's and Steak and Ale restaurants, Buffets Holdings, Inc., Interstate Bakeries Corporation, Parmalat Finanziaria, S.p.A., Bally Total Fitness Holding Corp., Saint Vincent Catholic Medical Centers, ASARCO LLC, Federal-Mogul Corporation, W.R. Grace & Co., Owens Corning, USG Corporation, the Roman Catholic Church in the United States, and the city of Vallejo, California. ================================================================= [ ] YES! Please enter my personal subscription to LEHMAN BROTHERS BANKRUPTCY NEWS at US$45 per issue until I tell you to cancel my subscription. Name: ---------------------------------------------- Firm: ---------------------------------------------- Address: ---------------------------------------------- ---------------------------------------------- Phone: ---------------------------------------------- Fax: ---------------------------------------------- E-Mail: ---------------------------------------------- (Distribution to multiple professionals at the same firm is provided at no additional cost.) LEHMAN BROTHERS BANKRUPTCY NEWS is distributed to paying subscribers by electronic mail. New issues are published on an ad hoc basis as significant activity occurs (generally every 10 to 20 days) in the Debtor's cases. The subscription rate is US$45 per issue. Newsletters are delivered via e-mail; invoices, transmitted following publication of each newsletter issue, arrive by fax. Re-mailing of LEHMAN BROTHERS BANKRUPTCY NEWS is prohibited. Distribution to multiple individuals at the same firm is provided at no additional charge; folks outside of your firm should set-up and pay for their own subscriptions. Subscriptions may be canceled at any time without further obligation. ----------------------------------------------------------------- [00001] BACKGROUND & DESCRIPTION OF LEHMAN BROTHERS ----------------------------------------------------------------- Lehman Brothers Holdings Inc. 745 Seventh Avenue New York, New York Telephone (212) 526-7000 Fax (212) 526-8766 http://www.lehman.com Lehman Brothers is the fourth largest investment bank in the United States. For more than 150 years, Lehman Brothers has been a leader in the global financial markets by serving the financial needs of corporations, governmental units, institutional clients and individuals worldwide. Through its team of more than 25,000 employees, Lehman Brothers offers a full array of financial services in equity and fixed income sales, trading and research, investment banking, asset management, private investment management and private equity. Its worldwide headquarters in New York and regional headquarters in London and Tokyo are complemented by a network of offices in North America, Europe, the Middle East, Latin America and the Asia Pacific region. The firm, through predecessor entities, was founded in 1850. Through its subsidiaries, Lehman is a global market-maker in all major equity and fixed income products. To facilitate its market-making activities, Lehman is a member of all principal securities and commodities exchanges in the United States, as well as the Financial Industry Regulatory Authority. Lehman also holds memberships on several principal international securities and commodities exchanges, including the London, Tokyo, Hong Kong, Frankfurt, Paris, Milan, Singapore and Australian stock exchanges. The Company has significant assets around the globe. As of May 31, 2008, the Company's consolidated assets totaled approximately $639 billion, and its consolidated liabilities totaled $613 billion. Lehman Brothers organizes its operations into three geographic regions: (i) Europe and the Middle East; (ii) Asia-Pacific, inclusive of operations in Australia and India, and (iii) the Americas. Business Segments Lehman Brothers operates three business segments: Capital Markets, Investment Banking and Investment Management. During the company's fiscal year ended Nov. 30, 2007, Capital Markets represented 64% of $19.26 billion in consolidated net revenues (total revenues of $59 billion less interest expenses). During the last two quarters, Lehman's net revenues have decreased: Lehman's Business Segments Net Revenues (In millions) Quarter Ended ------------- Aug. 31, May 31, Aug. 31, 2008 2008 2007 ---- ---- ---- A. Capital Markets Fixed Income ($4,602) ($2,975) $1,058 Equities 454 601 1,377 ------ ------ ------ Total (4,148) (2,374) 2,435 B. Investment Banking: Global Finance - Debt 220 288 350 Global Finance - Equity 160 330 296 Advisory Services 231 240 425 ------ ------ ------ Total 611 858 1,071 C. Investment Management: Asset Management 360 496 468 Private Investment Mgt. 274 352 334 ------ ------ ------ Total 634 848 802 ------ ------ ------ Total Net Revenues ($2,903) ($668) $4,308 ====== ====== ====== A. Capital Markets The Capital Markets segment primarily represents institutional client-flow activities, including secondary trading, financing, mortgage origination and securitization, prime brokerage and research activities in fixed income and equity products. These products include a wide range of cash, derivative, secured financing and structured instruments and investments. Lehman is a leading global market-maker in numerous equity and fixed income products, including U.S., European and Asian equities, government and agency securities, money market products, corporate high- grade, high-yield and emerging market securities, mortgage- and asset-backed securities, preferred stock, municipal securities, commodities and energy products, bank loans, foreign exchange, financing and derivative products. Lehman is one of the largest investment banks in terms of U.S. and pan-European listed equities trading volume and maintain a major presence in over-the-counter U.S. stocks, major Asian large capitalization stocks, warrants, convertible debentures and preferred issues. The Capital Markets segment also includes principal investing and proprietary trading activities including investments in real estate, private equity and other long-term investments. -- Equities Capital Markets The Equities Capital Markets business is responsible for equities and equity-related operations and products worldwide. These products include listed and over-the-counter securities, American Depositary Receipts and convertibles, as well as equity options, futures, warrants and other derivatives. During 2007, Lehman acquired the institutional equities business, including the institutional research group, of Brics Securities Limited, a brokerage firm in India. In December 2007, Lehman acquired certain assets related to Van der Moolen Specialists, including its NYSE portfolio of listed company specialist's assignments and certain technology. As a result, Lehman Brothers Market Makers, a division of Lehman Brothers Inc., Lehman's U.S. registered broker dealer, acts as specialist for approximately 400 NYSE-listed issues and is the fourth-largest specialist firm on the NYSE. -- Fixed Income Capital Markets Lehman actively participates in key fixed income markets worldwide and maintains a 24-hour trading presence in global fixed income securities. Lehman is a market-maker and participant in the new issue and secondary markets for, and take positions for its own account in, a broad variety of fixed income securities. During 2007, it acquired Grange Securities Limited, a full service Australian broker-dealer specializing in fixed income products. Fixed Income businesses include: * Government and Agency Obligations. Lehman Brothers is one of the leading primary dealers in U.S. government securities, participating in the underwriting of and market-making in U.S. Treasury bills, notes and bonds, and securities of federal agencies. It is also a market-maker in the government securities of all G-7 countries, and participate in other major European and Asian government bond markets. * Corporate Debt Securities and Loans. Lehman makes markets in fixed and floating rate investment grade debt worldwide. It is also a major participant in preferred stock and hybrid capital securities, including long-term and perpetual preferred stock and preferred securities, and auction rate securities. Global Family of Indices. Lehman Brothers' Global Family of Indices provides comprehensive performance and risk measurements for the major bond markets. The Index Group produces some of the most widely followed benchmarks in the global debt markets. * High Yield Securities and Leveraged Bank Loans. Lehman makes markets in non-investment grade debt securities. Through its high grade and high yield sales, trading and underwriting activities, we make commitments to extend credit in loan syndication transactions. * Money Market Products. Lehman holds leading market positions in the origination and distribution of medium- term notes and commercial paper. It is a dealer or agent for numerous active commercial paper and medium-term note programs on behalf of companies and government agencies worldwide. * Mortgage and Loan Origination and Mortgage- and Asset- Backed Securities. Lehman Brothers Bank, FSB, offers traditional and online mortgage banking services to individuals and institutions. Lehman Brothers Bankhaus AG, a German bank, offers lending and real estate financing to corporate and institutional borrowers worldwide. Lehman originates commercial and residential mortgage loans through LB Bank, Bankhaus and other subsidiaries in the U.S., Europe and Asia. During the third and fourth quarters of 2007, Lehman restructured its global residential mortgage origination business, including rescaling operations in the U.S. and U.K. due to market conditions and product revisions and closing BNC Mortgage LLC, its U.S. subprime origination platform, as well as its Korean mortgage business. In addition, in January 2008, Lehman suspended its wholesale and correspondent lending activities at its Aurora Loan Services subsidiary. Lehman Brothers Commercial Bank, a Utah-chartered industrial loan company, issues certificates of deposit to institutions and conducts certain lending activities. During 2007, Lehman acquired Capital Crossing Bank, a state-chartered, FDIC-insured commercial bank that originates small business loans. * Real Estate. Lehman invests in commercial real estate in the form of debt, joint venture equity investments and direct ownership interests. Lehman has interests in properties throughout the world. * Municipal and Tax-Exempt Securities. Lehman Brothers is a major dealer in municipal and tax-exempt securities, including general obligation and revenue bonds, notes issued by states, counties, cities and state and local governmental agencies, municipal leases, tax-exempt commercial paper and put bonds. * Fixed Income Derivatives. Lehman offers a broad range of interest rate- and credit-based derivative products and related services. Derivatives' professionals are integrated into all of its Fixed Income areas in response to the worldwide convergence of the cash and derivative markets. * Foreign Exchange. Its global foreign exchange operations provide market access and liquidity in all currencies for spot, forward and over-the-counter options markets around the clock. * Insurance. Lehman provides financing, securitization and capital markets execution services for clients with insurance-related portfolios. During 2007, Lehman acquired Congress Life Insurance Company, a life insurance company with licenses in 43 U.S. states, and a minority interest in Wilton Re Holdings Limited, a U.S. re-insurer that focuses on the reinsurance of mortality risk on life insurance policies. * Commodities. In 2005, Lehman Brothers established an energy trading business with global capability in power, natural gas and oil. The business includes futures, swaps, options and other structured products, as well as physical trading. Lehman delivers energy and commodity risk solutions to customers around the globe, and is active in the markets for crude oil and refined products, electricity, natural gas, coal, emissions and precious and base metals, trading all major financial commodity products, including futures, swaps, options and structured products. During 2007, Lehman acquired Eagle Energy Partners I, L.P., a Texas-based energy marketing and services company that manages and optimizes supply, transportation, transmission, load and storage portfolios on behalf of wholesale natural gas and power clients. Lehman also acquired a 56.5% controlling interest in SkyPower Corp., a Toronto-based early stage wind and solar power generation development company. -- Global Principal/Trading Strategies. Lehman's Global Principal Strategies is a proprietary trading business that employs multiple strategies across global markets, including capital and credit arbitrage and aviation finance and private equity investment opportunities. Global Trading Strategies is a proprietary multi-strategy value-oriented business whose investment strategies include merger arbitrage, distressed debt, special situations and private equity. -- Capital Markets Prime Services. The Capital Markets Prime Services group services clients in both Fixed Income and Equities Capital Markets and includes its Secured Financing, Prime Broker, Futures and Clearing and Execution businesses. The Secured Financing business within Capital Markets engages in three primary functions -- managing its equity and fixed income matched book activities, supplying secured financing to institutional clients and obtaining secured funding for its inventory of equity and fixed income products. The Prime Broker business engages in full operations, clearing and processing services for its hedge fund and other clients. Its Futures business executes and clears futures transactions for clients on an agency basis. The Clearing and Execution business provides these services to broker-dealers and other clients that do not have the capacity themselves. -- Capital Markets Global Distribution. Lehman's institutional sales organizations encompass distinct global sales forces that have been integrated into the Capital Markets businesses to provide investors with the full array of products offered by Lehman Brothers: * Equities Sales. Its Equities Capital Markets sales force provides an extensive range of services to institutional investors, focusing on developing long-term relationships through a comprehensive understanding of clients' investment objectives, while providing proficient execution and consistent liquidity in a wide range of global equity securities and derivatives. * Fixed Income Sales. Its Fixed Income Capital Markets sales force is one of the most productive in the industry, serving the investing and liquidity needs of major institutional investors by employing a relationship management approach that provides superior information flow and product opportunities for its clients. -- Research. Research at Lehman Brothers encompasses the full range of research disciplines, including fundamental, quantitative, economic, strategic, credit, relative value and market-specific analysis. To ensure in-depth expertise within various markets, Equity Research has established regional teams on a worldwide basis that are staffed with industry and strategy specialists. Fixed Income Research provides expertise in U.S., European and Asian government and agency securities, derivatives, sovereign issues, corporate securities, high yield, asset- and mortgage- backed securities, indices, emerging market debt and municipal securities. B. Investment Banking Investment Banking provides advice to corporate, institutional and government clients throughout the world on mergers, acquisitions and other financial matters. Investment Banking also raises capital for clients by underwriting public and private offerings of debt and equity instruments. Investment Banking professionals are responsible for developing and maintaining relationships with these clients to gain a thorough understanding of their specific needs and for bringing together the full resources of Lehman Brothers to accomplish their financial and strategic objectives. Investment Banking is comprised of: 1. Corporate Finance. The Corporate Finance unit is organized into global industry groups-Communications, Consumer/Retail, Financial Institutions, Financial Sponsors, Healthcare, Industrial, Media, Middle Markets, Natural Resources, Power, Real Estate and Technology- that include bankers who deliver industry knowledge and expertise to meet clients' objectives. 2. Mergers & Acquisitions. M&A is comprised of Advisory and Restructuring groups. Lehman Brothers' global M&A Advisory group delivers strategic advisory services to companies worldwide. The Restructuring group provides full-service restructuring expertise on a global basis, including financing capabilities and traditional restructuring advice. 3. Global Finance. Global Finance serves its clients' capital-raising needs through specialized product groups by: -- underwriting in the global equity capital markets. -- underwriting in the global fixed income markets. -- providing comprehensive financing solutions for below-investment grade clients across many industries through its leveraged loan, high yield bond, bridge financing and mezzanine debt products. -- assisting clients in identifying and managing their interest rate, inflation, commodities and currency and commodity risks, among other risks. Lehman Brothers maintains investment banking offices in North America, Europe, the Middle East, Latin America and the Asia Pacific region. C. Investment Management. Lehman's Investment Management segment provides strategic investment advice and services to institutional and high-net- worth clients on a global basis. Investment Management consists of the Asset Management and Private Investment Management businesses. During 2007, Lehman acquired H.A. Schupf, a high net worth boutique asset manager with approximately $2.3 billion in assets under management; LightPoint Capital Management LLC, a leveraged loan investment manager based in Chicago, Illinois, with approximately $3.2 billion in assets under management; Dartmouth Capital, a U.K.-based investment advisory firm with approximately $340 million in assets under advisory; and MNG Securities, an equity securities brokerage firm in Turkey. Lehman also purchased an initial 20% interest and a subsequent 5% interest in both Spinnaker Asset Management Limited and Spinnaker Financial Services, part of Spinnaker Capital, an emerging markets investment management firm, and a 20% interest in the D.E. Shaw group, a global investment management firm. Asset Management provides proprietary asset management products across traditional and alternative asset classes, through a variety of distribution channels, to individuals and institutions. It includes: (i) Neuberger Berman. Neuberger Berman has provided money management products and services to individuals and families since 1939. Lehman acquired Neuberger Berman in October 2003. Neuberger Berman's Private Asset Management business provides discretionary, customized portfolio management across equity and fixed income asset classes for high-net-worth clients. Neuberger Berman is also a leading sub-advisor of funds for institutional clients, including insurance companies, banks and other financial services firms. (ii) Lehman Brothers Asset Management brands. Lehman Brothers Asset Management specializes in investment strategies for institutional and qualified individual investors. Lehman Brothers Institutional Asset Management provides a full range of asset management products for pensions, foundations, endowments and other institutions. (iii) Private Equity. Private Equity provides opportunities in privately negotiated transactions across a variety of asset classes for institutional and high-net-worth individual investors. Its investment partnerships manage a number of private equity portfolios, with the Company's capital invested alongside that of its clients. Lehman Brothers creates funds, and through its Capital Markets business segment invests in asset classes in which it has strong capabilities, proprietary deal flow and an excellent reputation. The Private Investment Management unit provides traditional brokerage services and comprehensive investment, wealth advisory, trust and capital markets execution services to both high-net- worth individuals and small and medium size institutional clients, leveraging all the resources of Lehman Brothers: * High Net Worth Clients. Lehman's investment professionals and strategists work together to provide asset allocation, portfolio strategy and manager selection, and integrate that advice with tax, trust and estate planning. * Institutional Clients. For institutions, Lehman's leverage the Lehman Brothers Capital Markets franchise to provide brokerage and market-making services to small and mid-sized institutional clients in the fixed income and equities capital markets. Regulatory Oversight Many of Lehman Brothers' operations are subject to regulatory oversight in the various jurisdictions where it does business. All Lehman entities are subject to group-wide supervision and examination by the Securities and Exchange Commission as a Consolidated Supervised Entity. Several of Lehman's subsidiaries, including, Lehman Brothers, Inc., are registered with the SEC as broker-dealers, derivatives dealers, and investment advisers. As such, those entities are subject to regulation by the SEC and by self-regulatory organizations, including the Financial Industry Regulatory Authority, national securities exchanges such as the NYSE, and the Municipal Securities Rulemaking Board, among others. Securities firms are also subject to regulation by state securities administrators in those states in which they conduct business. Other subsidiaries of Lehman hold national bank charters and therefore are subject to regulation by various federal and state authorities, including the Office of Thrift Supervision, the Federal Deposit Insurance Corporation, and the Office of the Comptroller of the Currency of the United States. Lehman's insurance subsidiaries are subject to state insurance regulation in the states in which they are domiciled and in the other states in which they are licensed. Corporate Ownerships Lehman owns 10% or more of the stock of Imperial Sugar Company; Navigator Gas; LPATH Inc.; Derma Services, Inc.; Flagstone Reinsurance Holdings Ltd.; GLG Partners, Inc.; Ronco Corporation; Pacific Energy Partners LP; Blount International, Inc.; Pemstar Inc.; and Transmontaigne Inc. Lehman directly or indirectly owns an interest in various limited partnerships including: * Lehman Brothers Private Fund Management LP; * Lehman Brothers Private Fund Advisers LP; * LB-NL Holdings L.P.; * NL Funding, L.P.; * Lehman Brothers Holdings Scottish LP; * Lehman Brothers Scottish Holdings 2 LP; * Lehman Brothers Scottish Holdings 3 LP; * Eagle Energy Partners I L.P.; * Leveraged Loan Trading Holdings Partners; * 1180 Raymond; * 1211 6th Avenue LB Syndication Partner, LP; * 1745 Broadway LB Syndication Partner LP; * A 425 Park Avenue LB Syndication Partner, L.P.; * A LB Atlantic Area Portfolio Partner LP; * A LB Crescent City LP; * A LB DC Area Portfolio Partner LP; * A LB Deerwood Property LP; * A LB Eastview Center LP; * A LB Greensbrook Manor LP; * A LB Quail Valley LP; * A LB Ravenwood Apartments LP; * A LB/L - Lakeside Capital Partners; * A Orlando Centre LB Syndication Partner LP; * A Sheraton LW-LP; * A UK Distribution Holdings, L.P.; and * 1000 Islands Mall LP. Prepetition Capital Structure Ian T. Lowitt, the Company's chief financial officer, controller, and executive vice president, relates that Lehman has issued various securities to the public. Approximately 700 million shares of Lehman's common stock are publicly traded on the New York Stock Exchange. The Debtor has also issued several classes of preferred stock, warrants, and trust-preferred securities. The vast majority of the Company's financing for operations arises from financing provided to it. As of May 31, 2008, the Debtor owed approximately $110.5 billion on account of senior unsecured notes, approximately $12.6 billion on account of subordinated unsecured notes, and approximately $5 billion on account of junior subordinated notes. In addition to the cash borrowed to finance the operations of the Company, various entities within Lehman Brothers also enter into secured borrowing and lending transactions to finance inventory positions, obtain securities for settlement and meet clients' needs. Lehman Brothers receives collateral in connection with resale agreements, securities borrowed transactions, borrow/pledge transactions, client margin loans and derivative transactions. Lehman Brothers is generally permitted to sell or repledge these securities held as collateral and use them to secure repurchase agreements, enter into securities lending transactions or deliver to counterparties to cover short positions in the securities markets. As a general rule, Lehman Brothers purchases highly liquid securities (i.e., government bonds, U.S. agency securities, corporate bonds, asset-backed securities and equity securities) using secured funding. Illiquid assets (e.g., fixed assets, intangible assets and margin postings) and less liquid inventory positions (e.g., derivatives, private equity investments, certain corporate loans, certain commercial mortgages and real estate positions) are funded with cash. Lehman Brothers' secured funding for asset purchases is generally obtained through tri-party repurchase agreements in which a custodian bank or clearing organization acts as an intermediary between Lehman Brothers and its funding counterparties. The outstanding amount owed under such tri-party repurchase agreements stood at $188 billion as of May 31, 2008. Borrowings and deposit liabilities at banks consisted of these: May 31, Nov. 30 In millions 2008 2007 ---- ---- Short-term borrowings Unsecured Current portion of L.T. borrowings $20,991 $16,801 Commercial paper 7,948 3,101 Other 5,703 7,645 Secured 660 519 ------- ------- Total $35,302 $28,066 ------- ------- Amount carried at fair value $9,035 $9,354 Deposit liabilities at banks Time deposits At U.S. banks $10,530 $16,189 At non-U.S. banks 16,854 10,974 Savings deposits At U.S. banks 1,427 1,556 At non-U.S. banks 544 644 ------- ------- Total $29,355 $29,363 ------- ------- Amount carried at fair value $10,252 $15,986 Long-term borrowings Senior notes $110,553 $108,914 Subordinated notes 12,625 9,259 Junior subordinated notes 5,004 4,977 ------- ------- Total $128,182 $123,150 ------- ------- Amount carried at fair value $27,278 $27,204 ======= ======= The Company uses both committed and uncommitted bilateral and syndicated long-term bank facilities to complement long-term debt issuances. In particular, the Company maintains a $2.0 billion unsecured, committed revolving credit agreement with a syndicate of banks. In March 2008, the Company amended and restated this credit facility for three years to February 2011. In addition, the Company maintains a $2.5 billion multi-currency unsecured, committed revolving credit facility -- "European Facility" -- with a syndicate of banks for Lehman Brothers Bankhaus AG and Lehman Brothers Treasury Co. B.V. which expires in April 2010. As of May 31, 2008, there were no outstanding borrowings against either Holdings' credit facility or the European Facility. As of Aug. 31, 2008, Lehman's assets were down to $600 billion, with shareholders' equity at $28.4 billion: Aug. 31, May 31, Feb. 29, 2008 2008 2008 ---- ---- ---- Net assets: Total assets $600,000 $639,432 $786,035 Less: Cash and securities segregated and on deposit for regulatory and other purposes (12,000) (13,031) (16,569) Collateralized lending agreements (273,000) (294,526) (368,681) Identifiable intangible assets and goodwill (4,085) (4,101) (4,112) -------- -------- -------- Net assets $310,915 $327,774 $396,673 Tangible equity capital: Total stockholders' equity $28,443 $26,276 $24,832 Junior subordinated notes 4,919 5,004 4,976 Less: Identifiable intangible assets and goodwill (4,085) (4,101) (4,112) -------- -------- -------- Tangible equity capital $29,277 $27,179 $25,696 Lehman issued these stock, which are registered at the New York Stock Exchange: -- 694,401,926 outstanding shares of common stock, at $0.10 par value, -- preferred stock: (1) Up to 5 million shares of 5.94% Cumulative Preferred Stock, Series C; (2) Up to 4 million shares of 5.67% Cumulative Preferred Stock, Series D; (3) up to 12 million shares of 6.50% Cumulative Preferred Stock, Series F; (4) Up to 5.2 million shares of Floating Rate Convertible Preferred Stock, Series G; (5) Up to 66 million shares of 7.95% Non-Convertible Perpetual Preferred Stock, Series J; (6) Up to 12 million shares of 6.375% Preferred Securities, Series K; (7) Up to 12 million shares of 6.375% Preferred Securities, Series L; (8) Up to 16 million shares of 6.00% Preferred Securities, Series M; (9) up to 8 million shares of 6.24% Preferred Securities, Series N; (10) Up to 4 million shares of 7.25% Non-Cumulative Perpetual Convertible Preferred Stock, Series P; and (11) Up to 2 million shares of 8.75% Non-Cumulative Mandatory Convertible Preferred Stock, Series Q; According to Lehman, parties holding more than 5% of its stock are AXA and related parties, which hold a 7.25% stake, ClearBridge Advisors, LLC, which holds 6.33%, and FMR LLC, which has 5.87%. No corporation or entity directly or indirectly owns 10% or more of the issued and outstanding Common Stock of Lehman. In its 2007 annual report, Lehman said that return on average common stockholders' equity was 20.8%, with earnings per share at $7.26, with book value $39.44 per share. Lehman's stock closed at $60.63 per share on January 28, 2008. EVENTS LEADING TO CHAPTER 11 FILING Tightening of the credit market and bad bets on the real estate and mortgage markets significantly reduced Lehman's revenues throughout the year. Mr. Lowitt, Lehman's chief financial officer, said that Lehman was materially affected by conditions in the global financial markets and worldwide economic conditions. For most of 2008, Lehman Brothers operated in an extremely unfavorable global business environment. "Conditions were characterized by a continued lack of liquidity in the credit markets, significantly depressed volumes in most equity markets, a widening in certain fixed income credit spreads compared to the end of the 2007 fiscal year, and declining asset values." "The hardships," Mr. Lowitt continued, were compounded by slowed growth in major economies as a result of declining business and consumer confidence. Global inflation rose amid slowing economic growth. Commodity prices rose significantly during the quarter, with oil and gold reaching record levels, raising costs of industrial production. Central banks' concerns about exacerbating inflationary conditions limited their ability to effect monetary policies intended to provide liquidity within the markets." For the quarter ending August 31, 2008, Lehman posted a preliminary net loss of $3.9 billion, compared to an $887 million net income for the same quarter in 2007. The $3.9 billion loss, Bloomberg said, is Lehman's biggest loss in history. For the quarter ended May 31, 2008, Lehman posted $2.7 billion in losses, and $489 million in income for the quarter ended Feb. 29, 2008. The net loss, according to a company statement, was driven primarily by gross mark-to-market adjustments stemming from writedowns on commercial and residential mortgage and real estates. Lehman Brothers Holdings, Inc. Quarterly Income Statement (In Millions) For the Quarter Ended ------------------------------------------- Aug 31, May 31, Feb 29, Nov 30, Aug 31, 2008 2008 2008 2007 2007 ------- ------- ------- ------- ------- Net Revenues ($2,903) ($668) $3,507 $4,390 $4,308 Non-Interest Expenses: Compensation & Benefits 1,950 2,325 1,841 2,164 2,124 Non-personnel Expenses 971 1,094 1,003 996 979 Income before provision for income taxes (5,824) (4,087) 663 1,230 1,205 ------- ------- ------- ------- ------- Net Income ($3,927) ($2,774) $489 $886 $887 ======= ======= ======= ======= ======= Mr. Lowitt related that Lehman purchased many of its assets using secured credit obtained under tri-party repurchase agreements. When the market value of the pledged assets began to deviate from the pledged value of those assets, secured lenders imposed "haircuts" or discounts on Lehman. The devaluation of Lehman's pledged assets also had an adverse impact on borrowing availability, Mr. Lowitt said. The reduced availability of secured financing forced the firm to draw down on its liquidity pool in order to execute transactions. This loss of liquidity created a chain reaction of adverse economic consequences. With diminished cash to fund transactions, major credit rating agencies put the firm's credit ratings on negative watch with potential for multiple downgrades. Lehman's chief executive officer, Richard Fuld, Jr., stated, in a statement announcing the firm's preliminary financial report for the quarter ending August 31, 2008, that "[t]his is an extraordinary time for our industry, and one of the toughest periods in the firm's history." Lehman laid out "strategic initiatives" to "fundamentally reposition" the firm by "dramatically reducing balance sheet risk, reinforcing our focus on our client-facing businesses and returning the firm to profitability." Lehman, among other things, said it has taken steps to: -- significantly reduce its real estate portfolio by 32% or $17.2 billion in the third quarter; -- spin off to its shareholders $25 billion to $30 billion of its commercial real estate portfolio; -- sell about 50% of its stake in a subset of its Investment Management Division; and -- reduce annual common dividend to $0.05 per common share from $0.68 per common share. Lehman lost 94% of its market value this year, Bloomberg said. Revenues for the quarter ended May 31, 2008, dropped to $6.2 billion, compared to $15.5 billion for the same period in 2007. As of Sept. 12, 2008, Lehman's common stock changed hands at $3.65 per share. In November 2007, Lehman's common stock traded at a 52-week high of $67.73 per share. Bruce Wasserstein, head of Meditron Asset Management and former investment strategist at Lehman, attributed Lehman's downfall to "lack of control, poor management of internal risk, and ultimate self-interest," Bloomberg reported. The Associated Press, citing analysts, said Lehman should have sold Neuberger Berman and its real estate portfolio earlier this year. Failed Acquisition Talks; No Government Bail-Out Subsequently after the announcement of Lehman's preliminary financial report for the quarter ending August 31, 2008, the firm had an emergency meeting on September 12, 2008, with officials from the New York branch of the Federal Reserve Bank, the heads of major financial institutions, Treasury Secretary Henry Paulson, and SEC Chairman Christopher Cox. However, the government officials indicated that emergency federal funding would not be forthcoming to stabilize Lehman Brothers and provide the liquidity needed for its operations. According to BusinessWeek, the federal government has been unwilling to use taxpayers' moneys for Lehman after last month's heavy bail-out of Freddie Mac and Fannie Mae and last spring's guaranty in JPMorgan's acquisition of Bear Stearns Cos. The Associated Press said Lehman "waited too long to cry for help." Barclays Plc and Bank of America participated in talks regarding the possible acquisition of Lehman. However, Barclays pulled out from the sale negotiations because it couldn't obtain guarantees from the government or other Wall Street firms to protect against potential losses on Lehman's assets. "Barclays has its own problems so it's possible they realized they can't do this without government aid," Bruce Foerster, president of South Beach Capital Markets, told Bloomberg. BofA thereafter pulled out its offer. Failure of the acquisition talks left Lehman with little, to no, choice, but to seek protection under Chapter 11. Federal Reserve's Steps to Stabilize Market Though the U.S. Federal Reserve avoided a bail-out of Lehman, The Wall Street Journal said the federal agency is expected to take steps, including the expansion of its lending facilities, to stabilize the broader financial system. The Journal said the Fed would take a broader array of collateral from firms for the facility, including equities. Another facility, in which firms can swap risky securities for safe Treasury bonds, was also expanded, the report said. The Federal Reserve, on September 14, 2008, announced several initiatives to provide additional support to financial markets, including enhancements to its existing liquidity facilities. The collateral eligible to be pledged at the Primary Dealer Credit Facility has been broadened to closely match the types of collateral that can be pledged in the tri-party repo systems of the two major clearing banks. Previously, PDCF collateral had been limited to investment-grade debt securities. The collateral for the Term Securities Lending Facility also has been expanded; eligible collateral for auctions will now include all investment-grade debt securities. Previously, only Treasury securities, agency securities, and AAA-rated mortgage-backed and asset-backed securities could be pledged. The amounts offered under the auctions will be increased to a total of $150 billion, from a total of $125 billion. Lehman Files Largest Bankruptcy in U.S. History Lehman's bankruptcy petition listed $639 billion in assets and $613 billion in debts, effectively making the firm's bankruptcy filing the largest in U.S. history. The September 15 Chapter 11 filing by Lehman Brothers Holdings, Inc., does not include any of its subsidiaries. Sean Egan of Egan-Jones rating agency, says Lehman's bankruptcy "wo[n]'t have as big an impact" as the bankruptcy of Fannie Mae or Freddie Mac, Bear Stearns Cos., or Countrywide Financial Corp. would have had. "What the market has been telling us is that Lehman's equity and assets don't cover its liabilities, so the debt isn't worth 100 cents on the dollar," Mr. Egan said. "That means credit default swaps on Lehman's debt will be triggered." Martin Bienenstock, Esq., a prominent corporate restructuring lawyer at Dewey & LeBeouf, who represents several Lehman creditors, told Bloomberg that, in the short term, there will regrettably be losers including creditors, investors and the capital markets." The International Swaps and Derivatives Association, according to WSJ, said a "netting trading session" took place between 2:00 p.m. and 6:00 p.m. Sunday night, to reduce risks associated with Lehman's bankruptcy. In its bankruptcy petition, Lehman estimated that funds will be available for unsecured creditors. Lehman believes that it has more than 100,000 creditors. Senior unsecured debt-holders of Lehman may receive 60 cents to 80 cents on the dollar in a bankruptcy filing, research firm CreditSights said Sept. 14. Early quotations on Lehman senior debt show the bonds trading in the 32 cents to 35 cents range, CreditSights said. Secured creditors could receive 100% recovery, according to analyst David Hendler, who co-authored the report. Lehman owes $149 billion in bond debt. Possible Liquidation Bloomberg said Lehman has access to a lending facility for brokers that would permit an orderly process for unwinding the firm. A group of banks, Bloomberg said, citing people familiar with the matter, is also negotiating a fund to lend to troubled financial firms and shore up investor confidence. The WSJ said many Wall Street firms conceded that a liquidation of Lehman's assets likely would proceed in an orderly fashion. A liquidation of Lehman's assets would allow other firms to quickly buy real estate, securities, and other investments, preventing the assets from flooding the market. Because of this, the WSJ said some participants in the Fed talks decided that "liquidation was no worse an option that selling Lehman to a buyer such as Barclays." "There will be an orderly wind down," the WSJ quoted one unidentified banker involved in the matter as saying. "This was the default option. It happens when you have no buyer." The WSJ further said that the outside firms decided that instead of making guarantees for Barclays or some other purchaser of Lehman, they would prefer to pool their resources and buy the assets themselves, taking on the risks and carrying costs, along with the possibility of profiting down the road. Those firms, the WSJ said, would likely then buy assets such as mortgage-backed securities, leveraged loans, private-equity positions and investments in real estate or hedge funds. ----------------------------------------------------------------- [00002] COMPANY'S BALANCE SHEET AS OF MAY 31, 2008 ----------------------------------------------------------------- Lehman Brothers Holdings Inc. Consolidated Statement of Financial Condition (Unaudited) As of May 31, 2008 ASSETS Cash and cash equivalents $6,513,000,000 Cash and securities segregated & on deposit for regulatory & other purposes 13,031,000,000 Financial instruments & other inventory positions owned 269,409,000,000 Collateralized agreements: Securities purchased under agreements to resell 169,684,000,000 Securities borrowed 124,842,000,000 Receivables: Brokers, dealers, clearing organizations 16,701,000,000 Customers 20,784,000,000 Others 4,236,000,000 Property, equipment, leasehold improvements 4,278,000,000 Other assets 5,853,000,000 Identifiable intangible assets & goodwill 4,101,000,000 ---------------- TOTAL ASSETS $639,432,000,000 ================ LIABILITIES AND STOCKHOLDERS' EQUITY Short-term borrowings & current portion of long-term borrowings $35,302,000,000 Financial instruments, other inventory positions sold but not yet purchased 141,507,000,000 Collateralized financings: Securities sold under agreements to repurchase 127,846,000,000 Securities loaned 55,420,000,000 Other secured borrowings 24,656,000,000 Payables: Brokers, dealers, clearing organizations 3,835,000,000 Customers 57,251,000,000 Accrued liabilities, other payables 9,802,000,000 Deposit liabilities at banks 29,355,000,000 Long-term borrowings 128,182,000,000 ---------------- TOTAL LIABILITIES $613,156,000,000 ---------------- Commitments and contingencies Stockholders' Equity Preferred stock 6,993,000,000 Common stock, $0.10 par value: Shares authorized 1,200,000,000 Shares issued 612,948,910 in 2008 Shares outstanding 552,704,921 61,000,000 Additional paid-in capital 11,268,000,000 Accumulated other comprehensive loss, net of tax (359,000,000) Retained earnings 16,901,000,000 Other stockholders' equity, net (3,666,000,000) Common stock in treasury, at cost (4,922,000,000) ---------------- Total common stockholders' equity 19,283,000,00 Total stockholders' equity 26,276,000,000 ---------------- Total liabilities and stockholders' equity $639,432,000,000 ================ In a preliminary statement filed Sept. 10, Lehman said that as of Aug. 31, 2008, assets aggregate $600 billion. As of Aug. 31, its stockholders' equity was at $28.4 billion, up from $26.3 billion at the end of the second quarter of fiscal 2008. ----------------------------------------------------------------- [00003] COMPANY'S PRESS RELEASE ANNOUNCING CHAPTER 11 FILING ----------------------------------------------------------------- NEW YORK, New York -- September 15, 2008 -- Lehman Brothers Holdings Inc. announced today that it intends to file a petition under Chapter 11 of the U.S. Bankruptcy Code with the United States Bankruptcy Court for the Southern District of New York. None of the broker-dealer subsidiaries or other subsidiaries of LBHI will be included in the Chapter 11 filing and all of the broker-dealers will continue to operate. Customers of Lehman Brothers, including customers of its wholly owned subsidiary, Neuberger Berman Holdings, LLC, may continue to trade or take other actions with respect to their accounts. The Board of Directors of LBHI authorized the filing of the Chapter 11 petition in order to protect its assets and maximize value. In conjunction with the filing, LBHI intends to file a variety of first day motions that will allow it to continue to manage operations in the ordinary course. Those motions include requests to make wage and salary payments and continue other benefits to its employees. LBHI is exploring the sale of its broker-dealer operations and, as previously announced, is in advanced discussions with a number of potential purchasers to sell its Investment Management Division ("IMD"). LBHI intends to pursue those discussions as well as a number of other strategic alternatives. Neuberger Berman, LLC and Lehman Brothers Asset Management will continue to conduct business as usual and will not be subject to the bankruptcy case of its parent, and its portfolio management, research and operating functions remain intact. In addition, fully paid securities of customers of Neuberger Berman are segregated from the assets of Lehman Brothers and are not subject to the claims of Lehman Brothers Holdings' creditors. Lehman Brothers (ticker symbol: LEH) is headquartered in New York, with regional headquarters in London and Tokyo, and operates in a network of offices around the world. For further information about Lehman Brothers, visit the Firm's Web site at http://www.lehman.com/ ----------------------------------------------------------------- [00004] LEHMAN'S CHAPTER 11 DATABASE ----------------------------------------------------------------- Debtor: Lehman Brothers Holdings Inc. 745 Seventh Avenue New York, NY 10019 Bankruptcy Case No.: 08-13555 Chapter 11 Petition Date: September 15, 2008 Court: Southern District of New York (Manhattan) Debtor's Counsel: Harvey R. Miller, Esq. (harvey.miller@weil.com) Richard P. Krasnow, Esq. Lori R. Fife, Esq. Shai Y. Waisman, Esq. Jacqueline Marcus, Esq. Weil, Gotshal & Manges, LLP 767 Fifth Avenue New York, NY 10153 Tel: (212) 310-8000 Fax: (212) 310-8007 http://www.weil.com/ ----------------------------------------------------------------- [00005] LIST OF 30 LARGEST UNSECURED CREDITORS ----------------------------------------------------------------- Entity Nature of Claim Claim Amount ------ --------------- ------------ Citibank, N.A., as indenture bond debt $138,000,000,000 trustee, and The Bank of New York Mellon Corporation (with respect to the Euro Medium Term Notes only, as indenture trustee, under the Lehman Brothers Holdings. Senior Notes. Citibank, N.A. 399 Park Avenue New York, NY 10043 Attn: Wafaa Orfy Tel: (800) 422-2066 Fax: (212) 816-5773 The Bank of New York One Canada Square Canary Wharf, London E14 5AL Attn: Raymond Morison Tel: 44-207-964-8800 The Bank of New York bond debt $15,000,000,000 Mellon Corporation, as indenture trustee under the Lehman Brothers Holdings Inc. subordinated debt. The Bank of New York Mellon Corporation 101 Barclay Street New York, NY 10286 Attn: Chris O'Mahoney Tel: (212) 815-4107 Fax: (212) 815-4000 AOZORA bank loan $463,000,000 1-3-1 Kudan-Minami Chiyoda-ku, Tokyo 102-8660 Tel: 81-3-5212-9631 Fax: 81-3-3265-9810 Mizuho Corporate Bank Ltd. bank loan $289,000,000 Global Syndicated Financi Division 1-3-3, Marunochi, Chiyoda-ku Tokyo, Japan 100-8210 Timothy White Managing Director - Head of Originations Corporate and Investment Bank Department 1251 Avenue of the Americas 32nd floor New York, NY 10020-1104 Tel: (212) 282-3360 Fax: (212) 282-4487 Citibank N.A. Hong Kong bank loan $275,000,000 Branch Financial Institutions Group Asia Pacific 44f Citibank Tower 3 Garden Rd. Central Hong Kong Michael Mauerstein MD - FIG 388 Greenwich Street New York, NY 10013 Tel: (212) 816-3431 BNP Paribas bank loan $250,000,000 787 7th Avenue New York, NY 10019 Tel: (212) 841-2084 Shinesi Bank Ltd. bank loan $231,000,000 1-8, Uchisaiwaicho 2- Chome Chiyoda-ku, Tokyo 100-8501 Tel: 81-3-5511-5377 Fax: 81-3-4560-2834 UFJ bank Limited bank loan $185,000,000 2-7-1, Marunouchi Chiyoda-ku, TKY 100-8388 Stephen Small vice president head of financial institutions Bank of Tokyo-Mitsubishi UFJ Trust Company 1251 Avenue of the Americas New York, New York 10020-1104 Tel: (212) 782-4352 Fax: (212) 782-6445 Sumitomo Mitsubishi bank loan $177,000,000 Bank Corp. 13-6 Nihobashi- Kodenma-Cho, Chuo-ku, Tokyo, 103-0001 Yas Imai Senior Vice President Head of Financial Institution Group Sumitomo Mistui Banking Corporation 277 Park Avenue New York, NY 10172 Tel: (212) 224-4031 Fax: (212) 224-4384 Svenska Handelsbanken letter of credit $140,610,543 153 E. 53rd St., 37th floor New York, NY 10022 Tel: (212) 258,9487 KBC Bank letter of credit $100,000,000 125 W. 55th St. New York, NY 10019 Tel: (212) 258-9487 Mizuho Corporate Bank Ltd. bank loan $93,000,000 1-3-3, Marunouchi Chiyoda-ku, TKY 100-8219 Timothy White Managing Director - Head of Originations Corporate and Investment Bank Department 1251 Avenue of the Americas 32nd floor New York, NY 10020-1104 Tel: (212) 282-3360 Shinkin Central Bank bank loan $93,000,000 8-1, Kyobashi 3-Chome Chuo-ku, Tokyo 104-0031 Shuji Yamada Deputy General Manager Financial Institution Dept. Shinkin Central Bank 3-7, Yaesu 1-chome, Chuo-ku Tokyo 104-0028 Tel: 81-3-5202-7679 Fax: 81-3-3278-7051 The Bank of Nova Scotia bank loan $93,000,000 Singapore Branch 1 Raffles Quay #201-01 One Raffles Quay North Tower Singapore 0485583 George Neofitidis Director Financial Institutions Group One Liberty Plaza New York, NY 10006 Tel: (212) 225-5379 Fax: (212) 225-5254 Chuo Mitsui Trust & Banking bank loan $93,000,000 3-33-1 Shiba, Minato-ku, Tokyo, 105-0014 Tel: 81-3-5232-8953 Fax: 81-3-5232-8981 Lloyds Bank letter of credit $75,381,654 1251 Avenue of the Americas 39th Floor P.O. Box 4873 New York, NY 10163 Tel: (212) 930-8967 Fax: (212) 930-5098 Hua Nan Commercial Bank bank loan $59,000,000 Ltd. 38 Chung-King South Road Section 1 Taipei, Taiwan Bank of China bank loan $50,000,000 New York Branch 410 Madison Avenue New York, NY 10017 Tel: (212) 936-3101 Fax: (212) 758-3824 Nippon Life Insurance Co. bank loan $46,000,000 1-6-6, Marunouchi, Chiyoda-ku, Tokyo 100-8288 Takayuki Murai Deputy General Manager Corporate Finance Dept. #1 Nippon Life Insurance Co. Tel: 81-3-5533-9814 Fax: 81-3-5533-5208 ANZ Banking Group bank loan $44,000,000 Limited 18th Floor Kyobo Building 1 Chongro 1 Ku, Chongro Ka, Seoul, Korea Michael Halevi Director, Financial Institutions ANZ Banking Group 1177 Avenue of Americas New York, NY 10036 Tel: (212) 810-9871 Fax: (212) 801-9715 Standard Chartered Bank bank loan $41,000,000 One Madison Avenue New York, NY 10010-3603 Bill Hughes SVP-FIG Standard Chartered bank One Madison Avenue New York, NY 10010-3603 Tel: (212) 667-0355 Fax: (212) 667-0273 Standard Chartered Bank letter of credit $36,114,000 One Madison Avenue New York, NY 10010-3603 Bill Hughes SVP-FIG Standard Chartered bank One Madison Avenue New York, NY 10010-3603 Tel: (212) 667-0355 Fax: (212) 667-0273 First Commercial Bank bank loan $25,000,000 Co. Ltd. New York Agency 750 3rd Avenue, 34th Floor New York, NY 10017 Jason C. Lee Deputy General Manager First Commercial Bank Co. Ltd. New York Agency 750 3rd Avenue, 34th Floor New York, NY 10017 Tel: (212) 599-6868 Fax: (212) 599-6133 Bank of Taiwan bank loan $25,000,000 New York Agency 100 Wall Street, 11th Floor New York, NY 1005 Eunice S.J. Yeh Senior Vice President & General Manager 100 Wall Street, 11th floor New York, NY 10005 Tel: (212) 968-0580 Fax: (212) 968-8370 DnB NOR Bank ASA bank loan $25,000,000 NO-0021, Olso, Norway Stranden 21, Aker Brygge Tel: 47 22 9487 46 Fax: 47 22 48 29 84 Australia and New Zealand bank loan $25,000,000 Banking Group Limited Melbourne Office Level 6, 100 Queen Street Victoria Melbourne, VIC 3000 Australia Michael Halevi Director, Financial Institutions ANZ Banking Group 1177 Avenue of Americas New York, NY 10036 Tel: (212) 810-9871 Fax: (212) 801-9715 Australia National Bank letter of credit $12,588,235 1177 Avenue of the Americas, 6th Floor New York, NY 10036 Michael Halevi Director, Financial Institutions ANZ Banking Group 1177 Avenue of Americas New York, NY 10036 Tel: (212) 810-9871 Fax: (212) 801-9715 National Australia Bank letter of credit $10,294,163 245 Park Avenue, 28th Fl. New York, NY 10167 Michael Halevi Director, Financial Institutions ANZ Banking Group 1177 Avenue of Americas New York, NY 10036 Tel: (212) 810-9871 Fax: (212) 801-9715 Taipei Fubon Bank, New bank loan $10,000,000 York Agency 100 Wall Street, 14th floor NY NY 10005 Tel: (212) 968-9888 Fax: (212) 968-9800 ----------------------------------------------------------------- [00006] LEHMAN BROTHERS INTERNATIONAL (EUROPE) IN ADMINISTRATION ----------------------------------------------------------------- Tony Lomas, Steven Pearson, Dan Schwarzmann and Mike Jervis, partners at PricewaterhouseCoopers LLP, were appointed as joint administrators to Lehman Brothers International (Europe) on 15 September 2008. Lehman Brothers, the principal UK trading company in the Lehman group, was placed into administration earlier this morning, together with Lehman Brothers Ltd, LB Holdings PLC and LB UK RE Holdings Ltd. These are currently the only UK incorporated companies in administration. The joint administrators have been appointed to wind down the business in as orderly a manner as possible. Tony Lomas, joint administrator and partner of PricewaterhouseCoopers LLP emphasised: "Because the group managed its funding on a global basis the UK trading operation found itself unable to meet its obligations when the flow of funds dried up last night. Our priority now is to work with management and trading counterparties to agree the manner in which the assets and liabilities will be handled. "I would also like to emphasise that a number of group companies remain solvent and will continue to trade. These companies include LBAM (Europe) and a series of special purpose vehicles designed to manage portfolios of residential and commercial real estate assets and non performing loans." About PricewaterhouseCoopers PricewaterhouseCoopers -- http://www.pwc.com/ -- provides industry-focused assurance, tax and advisory services to build public trust and enhance value for its clients and their stakeholders. More than 146,000 people in 150 countries across our network share their thinking, experience and solutions to develop fresh perspectives and practical advice. 'PricewaterhouseCoopers' refers to PricewaterhouseCoopers LLP (a limited liability partnership in the United Kingdom) or, as the context requires, the PricewaterhouseCoopers global network or other member firms in the network, each of which is a separate and independent legal entity. ----------------------------------------------------------------- [00007] DEBTOR'S MOTION TO ENFORCE AUTOMATIC STAY ON CREDITORS ----------------------------------------------------------------- Lehman Brothers Holdings Inc., seeks a ruling by the U.S. Bankruptcy Court for the Southern District of New York enforcing the so-called "automatic stay" in its Chapter 11 case. Harvey Miller, Esq., at Weil, Gotshal & Manges LLP, in New York, says a court order enforcing the automatic stay pursuant to the Bankruptcy Code is required given the global nature of Lehman Brothers' businesses and its extensive dealings with foreign creditors. Under Section 362 of the Bankruptcy Code, the filing of a bankruptcy case triggers an injunction against the continuance of an action by any creditor against the debtor or its property. The automatic stay gives the debtor protection from its creditors subject to the oversight of the bankruptcy judge. "Many of the non-U.S. creditors affected by Section 362 of the Bankruptcy Code are unaware of the significant protection it provides to [Lehman Brothers]," Mr. Miller says. "A certain amount of [Lehman Brothers'] assets are located around the globe, which may further confuse a non-U.S. creditor that is unaccustomed to the broad reach of the automatic stay." Lehman Brothers holds regional headquarters in London and Tokyo and a network of offices in Europe, the Middle East, Latin America and the Asia Pacific region. It also holds memberships or associate memberships on several principal international securities and commodities exchanges. "The existence of such an order, which Lehman Brothers will be able to transmit to affected parties, will maximize the protections afforded by Sections 362 of the Bankruptcy Code," Mr. Miller says. He further says that the automatic stay may not be recognized by foreign creditors or tribunals unless embodied in an order of the Court. ----------------------------------------------------------------- [00008] MOODY'S CUTS LEHMAN'S RATINGS & INITIATES REVIEW ----------------------------------------------------------------- New York -- September 15, 2008 -- Moody's Investors Service downgraded the senior ratings of Lehman Brothers Holdings Inc. ("LBHI"), and those of certain guaranteed subsidiaries, to B3 from A2. The firm's subordinated debt was downgraded to Caa2 from A3, and its preferred stock to Ca from Baa1. The senior long-term rating of Lehman Brothers Inc. was lowered to B1 from A1 and subordinated debt to B3 from A2. The short-term ratings for all rated Lehman entities were lowered to Not-Prime from Prime-1. All long-term ratings were placed on review for possible further downgrade. Today's rating action follows the collapse in market confidence in the firm, and Lehman's announcement that it was filing for Chapter 11 bankruptcy protection after its failure to reach a merger agreement with a stronger strategic partner. According to Lehman, none of the firm's broker-dealer subsidiaries or other subsidiaries of LBHI will be included in the Chapter 11 filing. On September 10, 2008, Moody's placed Lehman on review with direction uncertain, reflecting the deterioration of Lehman's situation, as well as the assessment of the possibility of a strategic transaction that would add support to the ratings. Moody's noted in the September 10th rating action that should a strategic arrangement fail to materialize in the near term, Lehman's ratings would be downgraded, likely into the Baa category, with the ratings continuing on review for possible downgrade. However, the credit deterioration at Lehman has been far sharper than anticipated, with LBHI's pending bankruptcy filing driving the extent of today's rating downgrade. Moody's said that the B3 rating on LBHI senior obligations reflects Moody's expectations that the financial regulators will look to achieve an orderly wind-down of the firm that should help support existing asset value coverage for senior creditors. The higher B1 rating on Lehman Brothers Inc. reflects the regulated entity's primary broker-dealer status and higher quality balance sheet relative to unregulated entities. Nevertheless, the extended time expected to affect such a wind-down brings uncertainty as to ultimate asset value realizations. Within the review period Moody's will assess the potential for recovery for various securities across Lehman's capital structure. The ratings of the following Lehman subsidiaries are based upon the quality of the guarantee from LBHI and do not reflect the intrinsic quality of the balance sheets of these rated entities. -- Lehman Brothers International (Europe), -- Lehman Brothers OTC Derivatives Inc., -- Lehman Brothers Special Financing Inc., -- Lehman Brothers Bank, FSB, -- Lehman Brothers Commercial Bank, -- Lehman Brothers Bankhaus AG, -- Lehman Brothers Treasury Co,B.V. Moody's also said that the Caa2 rating on junior subordinated obligations and the Ca rating on preferred stock reflect higher loss expectations for these securities as Lehman's operations are wound down and asset liquidations occur. Lehman Brothers Holdings Inc. is a global investment bank and financial services firm headquartered in New York, NY with total stockholders equity of approximately $28.4 billion and $143 billion of long-term capital at August 31, 2008. The long-term and short-term ratings of Lehman Brothers Holdings Inc. and its subsidiaries were downgraded today. The following is a list of Lehman's major operating subsidiaries: Lehman Brothers Holdings Inc. -- long-term issuer rating to B3 from A2; -- subordinate rating to Caa2 from A3; -- preferred rating to Ca from Baa1; -- commercial paper rating to Non-Prime from P-1; -- long-term ratings placed on review for possible downgrade. Lehman Brothers, Inc. -- long-term issuer rating to B1 from A1; -- subordinate rating to B3 from A2; -- commercial paper rating to Non-Prime from P-1; -- long-term ratings placed on review for possible downgrade. Lehman Brothers Bank, FSB -- long-term deposit rating to B3 from A2; -- short-term deposit rating to Non-Prime from P-1; -- long-term ratings placed on review for possible downgrade. ----------------------------------------------------------------- [00009] FITCH DOWNGRADES LEHMAN TO 'D' ON BANKRUPTCY FILING ----------------------------------------------------------------- Chicago -- September 15, 2008 -- Fitch Ratings has downgraded the long- and short-term Issuer Default Ratings (IDRs) and outstanding debt ratings of Lehman Brothers Holdings Inc, (LBHI), parent of Lehman Brothers Inc and other subsidiaries as follows: --Long-term IDR to 'D' from 'A+'; --Short-term IDR to 'D' from 'F1'; --Senior debt to 'CCC' from 'A+'; --Subordinated debt to 'C' from 'A'; --Preferred stock to 'C' from 'A'. Fitch has also removed LBHI's long- and short-term ratings from Rating Watch Negative, where they were originally placed on Sept. 9. Today's rating action follows LBHI's declaration of bankruptcy. The ratings of the subsidiaries will remain on Rating Watch Negative and will likely be downgraded as additional information becomes available. LBHI's declaration of bankruptcy results from an inability to raise additional capital or effect a merger in the very near term. Liquidity has become constrained extremely limiting flexibility, particularly for its UK broker-dealer, Lehman Brothers Holdings, plc. LBHI is expected to explore the sale of several divisions and or subsidiaries including the investment management division which owns Neuberger Berman, the former Lincoln Capital and equity interests in GLG, Spinnaker and DE Shaw. Execution of the proposed structural sales and changes as discussed on LBHI's third-quarter 2008 earnings call are not likely to be executed. LBHI posted a net operating loss nine months year-to-date of $6.2 billion or ($10.81) per share. Offsetting these cumulative losses have been share raises of $4 billion of common equity and $4 billion of preferred debt which serve to cushion senior debt holders from any future losses. The mark to market nature of securities firms' assets result in regularly updated valuations. Fitch expects the liquidation and lack of financing by counterparties to reduce the most recent valuation of these assets, particularly the $17 billion of residential related securities and whole loans, and the $37 billion of commercial real estate exposures. However, an orderly liquidation should provide substantive cash for recovery at the senior level. At this time, Fitch expects limited to no recovery at the subordinated and preferred debt levels at LBHI. Fitch will evaluate ratings of various subsidiaries over the next few days with an expectation of downgrades of long-term IDRs of 'CCC' for Lehman Brothers Inc., Lehman Brothers Holdings, plc and Lehman Brothers International (Europe). By law, broker dealer subsidiaries are not subject to bankruptcy but in turn face liquidation. Fitch believes Lehman Brothers Inc, its US broker dealer, will continue to operate for some time. Eventual default remains a real possibility. LBHI's bank subsidiaries, Lehman Brothers Bank, FSB, Lehman Brothers Commercial Bank and Lehman Brothers Bankhaus AG will also be downgraded; however debt is expected to remain more highly rated than the broker-dealer subsidiaries. US based regulated entities will be protected from cash outflows to the parent. The vast majority of deposits are brokered retail deposits and all below $100,000. Uninsured deposits, while minimal, are expected to be protected by the well-capitalized status of the institutions. Borrowings at Lehman Brothers Bank, FSB are largely from the Federal Home Loan Bank System, and secured by mortgage collateral. Both bank entities have an ability to put weakened assets back to LBHI which will protect their capital base, but increase loss potential for unsecured creditors of LBHI. Fitch has downgraded the following ratings: Lehman Brothers Holdings Inc. -- Long-term IDR to 'D' from 'A+'; -- Long-term senior to 'CCC' from 'A+'; -- Senior unsecured debt to 'CCC' from 'A+'; -- Subordinated debt to 'C' from 'A'; -- Preferred stock to 'C-' from 'A'; -- Short-term IDR to 'D' from 'F1'; -- Short term debt to 'D' from 'F1'; -- Individual to 'F' from 'B/C'. All support ratings of subsidiaries are downgraded from '1' to '5'. Lehman Brothers Holdings Capital Trust III - VII -- Preferred stock to 'C-' from 'A'. Lehman Brothers UK Capital Trust LP, II and III -- Preferred stock to 'C-' from 'A'. Lehman Brothers E-Capital Trust I -- Preferred stock to 'C-' from 'A'. Fitch has also affirmed the following ratings: Lehman Brothers Holdings Inc. -- Support at '5'; -- Support Floor at 'NF'. Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site at http://www.fitchratings.com/. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site. *** End of Issue No. 1 ***