================================================================= LEHMAN BROTHERS BANKRUPTCY NEWS Issue Number 4 ----------------------------------------------------------------- Copyright 2008 (ISSN XXXX-XXXX) September 18, 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 ------------- [00056] DEBTORS' MOTION TO BORROW $450 MILLION FROM BARCLAYS BANK [00057] DEBTORS' MOTION TO SELL LBI TO BARCLAYS FOR $1.7 BILLION [00058] COURT AGREES TO RUSH-SALE, TO HOLD SALE HEARING SEPT. 19 [00059] DEBTORS' MOTION TO APPROVE BARCLAYS BREAK-UP FEE [00060] U.S. TRUSTEE APPOINTS 7-MEMBER CREDITORS' COMMITTEE [00061] UNSEC. CREDITORS' PANEL SELECTS MILBANK TWEED AS COUNSEL [00062] SEC WELCOMES LEHMAN-BARCLAYS $1.7-BIL. SALE DEAL [00063] DEBTORS' MOTION FOR JOINT ADMINISTRATION OF CH. 11 CASES [00064] LEHMAN BROTHERS SUSPENDS UNLISTED STRUCTURED PRODUCTS [00065] WTC IS TRUSTEE TO $47-BIL. LENDERS, HAS NO EXPOSURE [00066] RR DONNELLEY'S EXPOSURE UNDER $1M, LEAVES CREDITORS PANEL [00067] RBS SEES UP TO $1.8-BIL. UNSECURED CLAIM VS. LEHMAN [00068] BANK OF CHINA HAS $129-MIL. EXPOSURE TO LEHMAN [00069] CHINA MERCHANTS BANK HAS $70-MIL. EXPOSURE TO LEHMAN [00070] BOC HONG KONG HAS $69-MIL. EXPOSURE TO LEHMAN [00071] CHINA'S ICBC HOLDS $152-MIL. BONDS RELATED TO LEHMAN [00072] BELGIUM'S KBC HAS EUR280-MIL. EXPOSURE TO LEHMAN [00073] PRUDENTIAL FINANCIAL HAS $223-MIL. EXPOSURE TO LEHMAN [00074] PHILIPPINES' EXPOSURE LIMITED; 3 BANKS SET ASIDE $38.5M [00075] CONSTELLATION HAS TIES WITH LEHMAN, $2B-LOAN ON THE LINE [00076] 3 JAPANESE ASSET FIMS HAVE 65 FUNDS EXPOSED TO LEHMAN [00077] NYSE SUSPENDS TRADING IN LEHMAN-RELATED SECURITIES [00078] AUSTRALIA EXCHANGE SUSPENDS LEHMAN'S CLEARING SERVICES [00079] LEHMAN BOMBAY CONTINUES TRADING IN CASH SEGMENT [00080] LEHMAN HALTS IN LONDON EXCHANGE, TAGGED AS "DEFAULTER" [00081] HONG KONG SUSPENDS LEHMAN BROTHERS TRADING [00082] LEHMAN COLLAPSE WON'T HURT JAPAN BANK'S RATINGS, SAYS S&P [00083] SEC WORKS WITH OTHER REGULATORS TO PROTECT LEHMAN CLIENTS [00084] STANDARD & POOR'S DOWNGRADES LEHMAN-RELATED SECURITIES [00085] S&P REPORTS OF LEHMAN IMPACT ON EUROPEAN BANKS [00086] NEUBERGER BERMAN, ET AL., CONTINUE OPERATIONS [00087] LEHMAN WITHDRAWS AS ADVISER TO CITIC INT'L PRIVATIZATION [00088] 3 LEHMAN DIRECTORS DISPOSED OF SHARES ON PETITION DATE KEY DATE CALENDAR ----------------- 09/15/08 Voluntary Petition Date 09/16/08 U.S. Trustee Appoints Creditors' Committee 09/19/08 Hearing to Consider Sale to Barclays 10/02/08 Final DIP Financing Hearing 10/15/08 Deadline to Provide Utilities with Adequate Assurance 10/31/08 Deadline to Provide Initial Summary Financial Info. 11/14/08 Deadline to File Schedules of Assets and Liabilities 11/14/08 Deadline to File Statement of Financial Affairs 11/14/08 Deadline to File Lists of Contracts and Leases 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 03/__/09 Expiration of Barclays-backed DIP Financing Facility 09/15/10 Deadline for Debtor's Commencement of Avoidance Actions First Meeting of Creditors under 11 USC Sec. 341 Bar Date for filing Proofs of Claim ----------------------------------------------------------------- [00056] DEBTORS' MOTION TO BORROW $450 MILLION FROM BARCLAYS BANK ----------------------------------------------------------------- Lehman Brothers' ability to maintain business relationships with its customers, pay its employees, and satisfy other critical operating expenses is essential to its ability to survive, Richard P. Krasnow, Esq., at Weil, Gotshal & Manges LLP, told Judge Peck at a hearing yesterday in Manhattan, and there is little or no cash available to the Debtor. In light of the events of the last week, Mr. Krasnow said, Lehman no longer has liquidity to fund its operations. Without immediate access to a source of fresh working capital, Mr. Krasnow warned, Lehman's operations may literally shut down and result in irreparable harm to its business and substantial deterioration of the value of its enterprise to the detriment of its estate, its thousands of employees, its creditors, and its stockholders. Against this backdrop, Lehman Brothers asked Judge Peck for immediate authority to borrow up to $200,000,000 under the terms of a $450,000,000 Senior Secured Superpriority Debtor-in- Possession Credit Facility arranged by Barclays Bank plc. The Debtor will repay all amounts borrowed from Barclays from the proceeds of the sale of Lehman Brothers Inc. to Barclays Capital Inc. (or any higher bidder) for $1.7 billion. Pursuant to 11 U.S.C. Secs. 105, 363(b), and 364(c), Lehman Brothers asks the Court for authority to obtain postpetition financing from Barclays on these terms: Borrower: Lehman Brothers Holdings Inc. DIP Lenders: Barclays Bank plc and any other lenders who become a party to the DIP Credit Agreement. Loan Amount: $450,000,000, in the form of: -- a $250,000,000 Term Loan to be made available immediately following the entry of an Interim DIP Financing Order and -- a $200,000,000 Revolving Loan to be made available to the Debtor upon entry of a Final DIP Financing Order. Mandatory Prepayments: Proceeds from the Sale of Lehman Brothers Inc. and certain other assets must be used to pay off the DIP Credit Facility. All cash in excess of $5,000,000 at the close of any business day must be used to pay down any borrowings under the Revolving Loan Facility. Maturity Date: The earliest of: (A) March __, 2009; (B) the date on which the LBI/Barclays Sale Agreement terminates; and (C) consummation of a sale of Neuberger Berman Holdings LLC; Interest: At Barclays option: (1) for the first 60 days: -- LIBOR plus 6.0% per annum; -- the Prime Rate plus 5.0% per annum; or -- the Federal Funds Rate plus 5.5%; and (2) thereafter: -- LIBOR plus 7.5% per annum; -- the Prime Rate plus 6.5%; or -- the Federal Funds Rate plus 7.0%. all subject to a 3.5% LIBOR floor, a 4.5% Prime Rate floor, and a 4.0% Federal Funds Rate floor. In the event of a default, the Interest Rate increases by 2.0%. Fees: Lehman Brothers will pay Barclays an Unused Line Fee equal to 1% per year on every dollar is doesn't borrow under the DIP Financing Facility. Lehman Brothers will pay Barclays additional fees described in a non-public Fee Letter dated September 17, 2008. Collateral: All loans will be secured by a first priority lien in all of Lehman Brothers' equity interests in Neuberger Berman. Carve-Out: Barclays liens and superpriority administrative expense claims are subject to a $6,000,000 Carve- Out for payment of fees and expenses owed to the professionals representing Lehman Brothers and its Creditors' Committee, the Court Clerk and the U.S. Trustee in the event of a default. Use of Proceeds: The proceeds of the DIP Credit Facility will be used by the Debtor to fund professionals fees, personnel expenses and other operating expenses in accordance with a [non-public] budget to be agreed upon with the DIP Lenders. Conditions & Covenants: Lehman Brothers is required to appoint: Brian Marsal ALVARAZ & MARSAL, LLC 600 Lexington Avenue, 6th Floor New York, NY 10022 Telephone (212) 759-4433 Fax (212) 759-5532 as its Chief Restructuring Officer on terms reasonably acceptable to Barclays, and Mr. Marsal must report directly to Lehman's Board of Directors. Lehman Brothers is required to hire an investment banker or other financial advisor satisfactory to Barclays. Barclays has the right to appoint and retain its own financial advisor at Lehman Brothers' expense. Ian T. Lowitt, Lehman's chief financial officer, controller, and executive vice president, told Judge Peck that he believes the terms of the Barclays Loan Facility are significantly more favorable than any terms that would be offered by other lenders. Mr. Lowitt says this arises largely from the fact that Barclays is the proposed purchaser of Lehman Brothers Inc. Mr. Lowitt is convinced that the DIP Credit Facility reflects the exercise of the Debtor's sound business judgment. Mr. Lowitt assured Judge Peck that the Debtor negotiated with the DIP Lenders at arms- length, in good faith and pursuant to its sound business judgment. Interim Authority to Borrow $200,000,000 Finding that the terms and conditions of the DIP Credit Agreement are fair and reasonable under the circumstances, and that Lehman Brothers' business would be irreparably harmed if the DIP Credit Agreement were not approved, Judge Peck granted Lehman Brothers' interim authority to immediately borrow up to $200,000,000 from Barclays and use those borrowed funds as outlined in the Budget to which Lehman and Barclays have agreed. Judge Peck is convinced that Lehman has an immediate and critical need to obtain funds in order to continue the orderly operation of its business, to maintain business relationships, to make payroll, to pay the costs of administration of its estate and to satisfy other working capital and operational needs, and sees that Lehman is unable to obtain the required funds elsewhere or on terms more favorable than those offered by Barclays. Subject only to the Carve-Out, all amounts Lehman borrows from Barclays will: -- constitute, under section 364(c)(1) of the Bankruptcy Code, allowed superpriority administrative expense claims against the Debtor having priority over all administrative expenses of the kind specified in, or ordered pursuant to, any provision of the Bankruptcy Code, including, without limitation, those specified in, or ordered pursuant to, sections 105, 326, 328, 330, 503(b), 506(c), 507(a), 507(b), 546(c), 726 and 1114 of the Bankruptcy Code, or otherwise, whether incurred in the Chapter 11 Case or any conversion thereof to a case under chapter 7 of the Bankruptcy Code or any other related proceeding; and -- be secured, pursuant to section 364(c)(2) of the Bankruptcy Code, by valid, binding, enforceable, first priority and perfected Postpetition Liens in (a) all of Lehman's equity interests in Neuberger Berman Holdings LLC. Judge Peck instructs the Debtor to deliver a copy of the Fee Letter to the Court, the Creditors' Committee and the U.S. Trustee, and directs those parties to keep that document secret. Judge Peck will convene a Final DIP Financing Hearing on Oct. 2, 2008, in Manhattan. Objections, if any, must be filed and served no later than 4:00 p.m. on Sept. 25, 2008. Barclays is represented by: Lisa Schweitzer, Esq. Lindsee Granfield, Esq. CLEARY GOTTLIEB STEEN & HAMILTON LLP One Liberty Plaza New York, NY 10006 A full-text copy of the 100-page Credit Agreement is available at http://bankrupt.com/misc/LehmanBarclaysDIP.pdf at no charge. ----------------------------------------------------------------- [00057] DEBTORS' MOTION TO SELL LBI TO BARCLAYS FOR $1.7 BILLION ----------------------------------------------------------------- [00058] COURT AGREES TO RUSH-SALE, TO HOLD SALE HEARING SEPT. 19 ----------------------------------------------------------------- See prior related entry at [00034] (Barclays Inks $1.75B Deal to Buy Lehman's Key U.S. Units). Under the terms of a 47-page Asset Purchase Agreement dated September 16, 2008 -- a full-text copy of which is available at http://bankrupt.com/BarclaysAPA.pdf at no charge -- Lehman Brothers Holdings Inc., non-debtor Lehman Brothers Inc., and LB 745 LLC agree to sell to Barclays Capital Inc.: these Included Assets: (a) $1,300,000,000 of Retained Cash held by Lehman Brothers Inc. and its Subsidiaries; (b) all customer, security, utility, and similar deposits; (c) Transferred Real Property Leases; (d) approximately $70,000,000,000 (at book value) of government securities, commercial paper, corporate debt, corporate equity, exchange traded derivatives and collateralized short-term agreements; (e) 50% of each position in the residential real estate mortgage securities; (f) furniture and equipment; (g) Purchased Intellectual Property, including the LEHMAN and LEHMAN BROTHERS names and marks, all patents, trademarks, copyrights and software rights; (h) Purchased Contracts; (i) all relevant Business Documents and relevant personnel files; (j) all Permits to the extent assignable; (k) all supplies; (l) rights under relevant non-disclosure, confidentiality, non-compete, non-solicitation and similar agreements; (m) [intentionally omitted] (n) rights to "Lehman" indices and analytics that support the indices; (o) general trading tools supporting the Business; (p) interests in Townsend Analytics; (q) interests in Eagle Energy Management LLC; (r) all past and present goodwill and other intangibles associated with or symbolized by the Business; (s) Mercantile Exchange license agreements with respect to 335 South LaSalle Street and 400 South LaSalle Street in Chicago; and (t) any insurance proceeds from the occurrence of a post- closing event; but not these Excluded Assets: (1) interests in affiliates other than Townsend Analytics and Eagle Energy Management LLC; (2) all cash other than the Retained Cash; (3) intercompany receivables; (4) Excluded Contracts; (5) intellectual property rights that don't constitute Purchased Intellectual Property; (6) confidential personnel and medical records and books and records that Lehman Brothers Inc. is required to retain by law, corporate minute books, stock ledgers and stock certificates of Subsidiaries; (7) refunds, rebates and tax refunds; (8) non-SIPC insurance policies; (9) pre-closing dates claims and causes of action; (10) commercial real estate investments, private equity investments and hedge fund investments; (11) 50% of each position in residential real estate mortgage securities; (12) Lehman Brothers Derivative Products Inc.'s derivatives contracts; (13) artwork (through Barclays will have the right to possess the artwork for one year and will have the option to purchase it at its appraised value); (14) assets related to the Investment Management Business and related derivatives contracts; (15) Specific Excluded Assets that will be used to satisfy Specific Excluded Liabilities; (16) real property leases other than the Transferred Real Property Leases; and (17) assets of Lehman Commercial Paper Inc. pursuant to 11 U.S.C. Sec. 363 for the sum of: (A) $250,000,000 in cash; (B) the appraised value of Lehman's headquarters at 745 Seventh Avenue less a reasonable market commission; (C) the appraised value of the Cranford, New Jersey, Data Center less a reasonable market commission; (D) the appraised value of the Piscataway, New Jersey, Data Center less a reasonable market commission; which is estimated to total about $1,700,000,000. Contract Assumption & Assignment Lehman Brothers intends to assume and assign to Barclays leases for premises located at: -- 125 High Street in Boston; -- 190 South LaSalle Street in Chicago; and -- 10250 Constellation Boulevard in Los Angeles. pursuant to 11 U.S.C. Sec. 365. Barclays will have the right, but not the obligation, to take assignment of other contracts it designates. The parties estimate that the cure costs associated with these assumption and assignment transactions are about $1,500,000,000. Barclays will pay any cure amounts applicable to any contracts it assumes. Lehman Brothers suggests that Barclays financial condition and reputation provide parties to contracts with ample "adequate assurance of future performance" as required by 11 U.S.C. Sec. 365(f)(2). Employees Barclays has agreed to absorb approximately 10,000 Lehman Brothers employees for a period of 90 days and pay any employee laid off thereafter 20% of the amount they earned in the prior year. Lehman Brothers estimates Barclays will free it from close to $2,500,000,000 of employee-related obligations. Barclays has the right to walk away from the Asset Purchase Agreement if eight workers designated as Critical Employees don't join Barclays. Barclays also has the right to walk away if more than 60 of a pool of 200 Key Employees don't join Barclays. Regulatory Review Barclays can walk away from the Asset Purchase Agreement if Lehman Brothers Inc. files a Chapter 7 petition, or if the U.S. Department of Justice, U.S. Commodity Futures Trading Commission or Securities and Exchange Commission balk. SIPA Proceeding The Asset Purchase Agreement contemplates that Lehman Brothers Inc. will consent to the commencement of a case under the Securities Investor Protection Act of 1970, 15 U.S.C. Secs. 78aaa, et seq. In that proceeding, the Debtors will request that the SIPA Trustee consent to the sale and request the SIPA Court's approval of the sale. Lehman Brothers says the Securities Investor Protection Corporation and the Federal Reserve Bank have been apprised of this plan. Time Is of the Essence "The sale . . . is critical to the stabilization of value," Jacqueline Marcus, Esq., at Weil, Gotshal & Manges LLP, tells Judge Peck. The value of the business declines every day it is "subject to the vagaries and vicissitudes of the marketplace and the impact of bankruptcy." Time is of the essence, Ms. Marcus stresses, because Lehman Brothers' business is dependent upon its ability to assure its clients and customers of its financial and operational integrity, and Lehman can't do that today. In connection with this transaction, Lehman Brothers is receiving additional legal counsel from John Finley, Esq. Andrew Keller, Esq. SIMPSON THACHER & BARTLETT LLP 425 Lexington Avenue New York, NY 10017 and Barclays is being advised by: Victor I. Lewkow, Esq. David Leinwant, Esq. Duane McLaughlin, Esq. CLEARY GOTTLIEB STEEN & HAMILTON LLP One Liberty Plaza New York, NY 10006 - and - Mitchell S. Eitel, Esq. Jay Clayton, Esq. SULLIVAN & CROMWELL LLP 125 Broad Street New York, NY 10004 Court Approves Protocol, To Hold Sale Hearing Tomorrow Judge Peck approved the Debtors' proposed sale procedures. A hearing to consider approval of the proposed sale is scheduled for Sept. 19, at 4:00 p.m. in Courtroom 601. Judge Peck says he will entertain all objections lodged before the conclusion of the sale hearing, and oral objections will be considered at the hearing. The sale hearing will not be adjourned or canceled without prior consent of Barclays, the Securities and Exchange Commission, the Commodity Futures Trading Commission, and the Federal Reserve Bank of New York. Attorneys for creditors expressed concern over how quickly Lehman Brothers is pushing to close the sale and that it may be leaving assets behind in the broker-dealer unit that Barclays is buying, according to a report by Bloomberg. Proposed counsel for the Official Committee of Unsecured Creditors, Luc Despins, Esq., at Milbank Tweed Hadley & McCloy LLP, said Lehman Brothers is leaving about $1,300,000,000 in cash and equivalents with the unit. Mr. Despins, however, said that a provision in the bidding rules preventing the company from seeking bids to compete with Barclays has been eliminated. Daniel Goldin, Esq., at Akin Gump Strauss Hauer & Feld LLP, who represents some bondholders, said creditors needed to know who else Lehman Brothers has talked to about a sale ahead of its bankruptcy filing. He asked for more time beyond a sale hearing to allow the creditors' financial advisers to talk with Lehman Brothers' financial adviser Lazard. Harvey Miller Esq., at Weil, Gotshal & Manges LLP, representing Lehman Brothers, said the company does not have enough money to operate and that its deal with Barclays needs to close immediately or there won't be anything to sell. ----------------------------------------------------------------- [00059] DEBTORS' MOTION TO APPROVE BARCLAYS BREAK-UP FEE ----------------------------------------------------------------- The Debtors obtained the Court's approval to pay Barclays a $100,000,000 Break-Up Fee and reimburse up to $25,000,000 of Barclays' expenses in the event that Barclays' bid is topped by a competing offer. The Debtors told Judge Peck at a hearing in Manhattan yesterday that the proposed Break-Up Fee is reasonable under the circumstances, satisfies the business judgment rule, and is consistent with the Second Circuit's teaching in In re Integrated Resources, 147 B.R. 650 (S.D.N.Y. 1992), appeal dismissed, 3 F.3d 49 (2d Cir. 1993). "The approval of break-up fees and other forms of bidding protections in connection with the sale of significant assets pursuant to section 363 of the Bankruptcy Code have become an established practice in chapter 11 cases," Jacqueline Marcus, Esq., at Weil, Gotshal & Manges LLP, told Judge Peck. ----------------------------------------------------------------- [00060] U.S. TRUSTEE APPOINTS 7-MEMBER CREDITORS' COMMITTEE ----------------------------------------------------------------- Pursuant to Section 1102 of the Bankruptcy Code, Diana G. Adams, the United States Trustee for Region 2, appointed these seven creditors to serve on the Official Committee of Unsecured Creditors in Lehman Brothers' Chapter 11 cases: 1. Wilmington Trust Company, as Indenture Trustee 520 Madison Avenue, 33rd Floor New York, New York 10022 Attn: James J. McGiniey, Managing Debtor Phone Number (212) 415-0522 Fax Number (212) 415-0513 2. The Bank of NY Mellon 101 Barclay - 8 W. New York, New York 10286 Attn: Gerard Facendola, Vice President Corporate Trust Phone Number (212) 815-5373 3. Shinsei Bank, Limited 1-8, Uchisaiwaicho 2- Chome Chiyoda - Ku, Tokyo 100-8501 Japan Attn: Edward P. Gilbert Phone Number 81-3-5510-6614 Fax Number 81-3-4560-2846 4. Mizuho Corporate Bank, Ltd. as Agent 1251 Avenue of the Americas New York, New York 10020-1104 Attn: Noel P. Purcell, Senior Vice President Phone Number (212) 282-3486 Fax Number (212) 282-4490 5. The Royal Bank of Scotland, PLC 101 Park Avenue, 6th Floor New York, New York 10178 Attn: Alan Ferguson/Michael Fabiano Phone Number (212) 401-3552 or (212) 401-3663 6. Metlife 10 Park Avenue P.O. Box 1902 Morristown, New Jersey 07962-1902 Attn: David Yu, Director Phone Number (973) 355-4581 Fax Number (973) 355-4230 7. RR Donnelley & Sons 3075 Highland Parkway Downers Grove, Il. 60515 Attn: Daniel Pevonka, Senior Manger Legal Accounts Phone Number (630) 322-6931 Fax Number (630) 322-6052 R.R. Donnelley & Sons Company said in a statement released yesterday afternoon that it has resigned from the Creditors Committee. The U.S. Trustee has not yet appointed a replacement. R.R. Donnelley said that its exposure to Lehman is less than $1 million. The Trial Attorney at the United States Trustee's office in charge of Lehman Brothers' chapter 11 cases is: Andrew D. Velez-Rivera, Esq. Office of the United States Trustee 33 Whitehall Street, 21st Floor New York, New York 10004 Tel. No. (212) 510-0500 Official creditors' committees have the right to employ legal and accounting professionals and financial advisors, at the Debtors' expense. They may investigate the Debtors' business and financial affairs. Importantly, official committees serve as fiduciaries to the general population of creditors they represent. Those committees will also attempt to negotiate the terms of a consensual Chapter 11 plan -- almost always subject to the terms of strict confidentiality agreements with the Debtors and other core parties-in-interest. If negotiations break down, the Committee may ask the Bankruptcy Court to replace management with an independent trustee. If the Committee concludes reorganization of the Debtor is impossible, the Committee will urge the Bankruptcy Court to convert the Chapter 11 cases to a liquidation proceeding. The Committee has selected Milbank Tweed Hadley & McCloy LLP, as its legal counsel. * * * Lehman's creditors convened for the Organizational Meeting at 6:00 p.m. Tuesday evening and waited until almost midnight as the Office of the U.S. Trustee interviewed candidates for the committee and assessed potential conflicts of interest. According to Bloomberg News, creditors interviewed by the U.S. Trustee that weren't named as committee members included Swedish bank Svenska Handelsbanken AB; London-based investment manager Western Asset Management Co.; Bank of China Ltd.; Bank of Tokyo Ltd.; Charlotte, North Carolina-based Bank of America Corp.; and BlackRock Inc. ----------------------------------------------------------------- [00061] UNSEC. CREDITORS' PANEL SELECTS MILBANK TWEED AS COUNSEL ----------------------------------------------------------------- The Official Committee of Unsecured Creditors of Lehman Brothers Holdings, Inc., has selected Milbank Tweed Hadley & McCloy LLP, as its legal counsel. Kramer Levin Naftalis & Frankel, Akin Gump Strauss Hauer & Feld and Paul Weiss Rifkind Wharton & Garrison were also interviewed by the Committee as potential counsel, Kramer Levin partner David Feldman said in an interview with Bloomberg. Milbank Tweed's attorneys primarily responsible for the firm's representation of the Committee are: Dennis F. Dunne, Esq. Luc A. Despins, Esq. Wilbur F. Foster, Jr., Esq. MILBANK, TWEED, HADLEY & McCLOY LLP 1 Chase Manhattan Plaza New York, New York 10005 Telephone: (212) 530-5000 Facsimile: (212) 530-5219 E-mail: ddunne@milbank.com ldespins@milbank.com wfoster@milbank.com - and - Paul Aronzon, Esq. Gregory A. Bray, Esq. MILBANK, TWEED, HADLEY & McCLOY LLP 601 South Figueroa Street, 30th Floor Los Angeles, CA 90017 Telephone: (213) 892-4000 Facsimile: (213) 629-5063 E-mail: paronzon@milbank.com gbray@milbank.com Mr. Despins is a senior partner in the Financial Restructuring Group, and is resident in the Firm's New York office. Mr. Despins' prior engagements include advising the unsecured creditors committees in Refco, Inc.'s and Enron Corp.'s chapter 11 proceedings, and representing the agent for the secured lenders in Adelphia Communications' chapter 11 cases. ----------------------------------------------------------------- [00062] SEC WELCOMES LEHMAN-BARCLAYS $1.7-BIL. SALE DEAL ----------------------------------------------------------------- WASHINGTON, D.C. -- Sept. 17, 2008 -- Since the decision by Lehman Brothers Holdings, Inc. to file for bankruptcy protection on Sunday, Sept. 14, 2008, the Securities and Exchange Commission has moved swiftly to protect investors' securities and cash. Since Sunday, the SEC has worked closely with lawyers and representatives of Lehman, Barclays, and other interested parties, as well as other U.S. and international regulators, including the U.K. Financial Services Authority, to arrange for the orderly transfer of customer accounts. The announcement that Barclays Capital plans to acquire the business and assets of Lehman Brothers, Inc., the U.S. brokerage arm of the consolidated holding company will, if approved by the U.S. bankruptcy court, provide for the resolution of all of Lehman Brothers, Inc.'s U.S. operations. SEC Chairman Christopher Cox said, "This is welcome news for every one of Lehman's customers. If approved by the court, customers will be able to look forward to an immediate transition of their accounts. Even before the transaction is completed, they will benefit because the broker-dealer and 10,000 Lehman employees will be able to continue their work with clarity about their future, and with greater funding resources for the broker- dealer's operations." The SEC is leading the U.S. government's efforts to assure the prompt and orderly transfer of Lehman's customer accounts to another broker-dealer with as little disruption as possible to customers. Together with the Federal Reserve Bank of New York, bankruptcy counsel, SIPC, and FINRA, as well as other regulators and interested parties, the SEC has been working to address the issues generated by the filing for protection under Chapter 11 by the broker-dealer's parent company. SEC staff from the agency's Washington D.C. and New York City offices remain on-site at Lehman headquarters in New York and at the Federal Reserve Bank of New York. Under the terms of the transaction as proposed, in addition to Barclays acquiring the U.S. business and operating assets of Lehman Brothers, Inc., the transaction includes the Lehman Brothers headquarters building in New York City. The transaction is subject to approval by the bankruptcy court. ----------------------------------------------------------------- [00063] DEBTORS' MOTION FOR JOINT ADMINISTRATION OF CH. 11 CASES ----------------------------------------------------------------- See prior entry at [00030]. The Court approved the proposed joint administration of the Chapter 11 cases of Lehman Brothers Holdings Inc., and LB 745 LLC. It also permitted the Debtors to file their monthly operating reports on a consolidated basis. In connection to this, the Court issued a separate ruling directing that the orders it previously issued in Lehman Brothers' case be made applicable to LB 745. These include the orders approving the (i) proposed enforcement of the automatic stay; (ii) the employment of Epiq Bankruptcy Solutions, LLC; (iii) the extension of deadline for providing information required under Local Bankruptcy Rule 1007-2(a) and (b); (iv) extension of deadline to file schedules and statements of financial affairs; and (v) an order waiving the requirement to file a list of creditors. ----------------------------------------------------------------- [00064] LEHMAN BROTHERS SUSPENDS UNLISTED STRUCTURED PRODUCTS ----------------------------------------------------------------- Lehman Brothers Holdings Inc. suspended the provision of secondary market quotes or liquidity for unlisted structured products. In a Sept. 17 statement, Lehman Brothers said it suspended the provision for unlisted structured products issued by Pacific International Finance Limited, Atlantic International Finance Limited, and Pyxis Finance Limited pending further announcements. Lehman Brothers is the swap guarantor for the minibonds issued by Pacific International and the notes issued by the two other companies. It is also the guarantor of the collateral for the notes and for some series of minibonds. The swap counterparties for the minibonds and the notes are all wholly-owned subsidiaries of Lehman Brothers. Lehman Brothers Asia Limited is the arranger of the Lehman Brothers Unlisted Structured Products. ----------------------------------------------------------------- [00065] WTC IS TRUSTEE TO $47-BIL. LENDERS, HAS NO EXPOSURE ----------------------------------------------------------------- WILMINGTON, Delaware -- September 17, 2008 -- Wilmington Trust, a leading provider of institutional trustee, agency, and administrative services through its Corporate Client Services (CCS) business, said today that it has been named as indenture trustee for holders of approximately $47 billion of debt issued by Lehman Brothers Holdings, Inc. (Lehman Holdings), which filed for Chapter 11 protection on September 15, 2008 in the U.S. District Court for the Southern District of New York. As indenture trustee, Wilmington Trust was appointed today by the United States Trustee to serve on the unsecured creditors' committee in the Lehman Holdings case. In this capacity, Wilmington Trust provides trust and administrative services for some of Lehman Holdings' creditors. Through its CCS business, Wilmington Trust is paid a fee for these services, which are specified in documents that govern the trust. Wilmington Trust has no credit or investment exposure to Lehman Holdings in either its loan or investment securities portfolios. "Our appointment as indenture trustee in this case reflects our position as a premier provider of trustee and administrative services for corporate clients," said Ted T. Cecala, Wilmington Trust's chairman and chief executive officer. "Lehman Holdings' bankruptcy filing does not affect our balance sheet or bottom line, and it poses no credit or investment risk to us." About Wilmington Trust Wilmington Trust Corporation (NYSE: WL) is a financial services holding company that provides Regional Banking services throughout the mid-Atlantic region, Wealth Advisory Services for high-net-worth clients in 36 countries, and Corporate Client Services for institutional clients in 86 countries. Its wholly owned bank subsidiary, Wilmington Trust Company, which was founded in 1903, is one of the largest personal trust providers in the United States and the leading retail and commercial bank in Delaware. Wilmington Trust Corporation and its affiliates have offices in Arizona, California, Connecticut, Delaware, Florida, Georgia, Maryland, Massachusetts, Minnesota, Nevada, New Jersey, New York, Pennsylvania, South Carolina, Vermont, the Cayman Islands, the Channel Islands, London, Dublin, Frankfurt, Luxembourg, and Amsterdam. ----------------------------------------------------------------- [00066] RR DONNELLEY'S EXPOSURE UNDER $1M, LEAVES CREDITORS PANEL ----------------------------------------------------------------- CHICAGO, Illinois -- September 17, 2008 -- R.R. Donnelley & Sons Company (NYSE: RRD) announced today that its exposure to the Lehman Brothers Holdings Inc. bankruptcy filing is less than $1.0 million, substantially all related to trade accounts receivable. RR Donnelley does not have any direct financial transaction exposure with Lehman Brothers, nor is Lehman Brothers a part of the Company's $2.0 billion committed revolving credit facility. A filing by the United States Bankruptcy Court in the Southern District of New York on September 17, 2008 announced the appointment of RR Donnelley as a member of the Unsecured Creditors Committee. RR Donnelley has resigned from the Committee. About RR Donnelley RR Donnelley (NYSE: RRD) is the world's premier full-service provider of print and related services, including business process outsourcing. Founded more than 144 years ago, the company provides products and solutions in commercial printing, direct mail, financial printing, print fulfillment, labels, forms, logistics, call centers, transactional print-and-mail, print management, online services, digital photography, color services, and content and database management to customers in the publishing, healthcare, advertising, retail, technology, financial services and many other industries. The largest companies in the world and others rely on RR Donnelley's scale, scope and insight through a comprehensive range of online tools, variable printing services and market-specific solutions. ----------------------------------------------------------------- [00067] RBS SEES UP TO $1.8-BIL. UNSECURED CLAIM VS. LEHMAN ----------------------------------------------------------------- Martin Bienenstock, Esq., at Dewey & LeBoeuf, said on Sept. 16 that Royal Bank of Scotland Group PLC is facing between $1.5 billion and $1.8 billion in claims against Lehman Brothers Holdings Inc., Reuters reports. Mr. Bienenstock, who represents RBS and its affiliate ABN AMRO, said that the claims are partially based on an unsecured guarantee from Lehman and connected to trading losses with Lehman subsidiaries. According to Bloomberg News, Mr. Bienenstock expects Lehman's operations and assets to be liquidated, and years of litigation as creditors fight to recover what they're owed. ----------------------------------------------------------------- [00068] BANK OF CHINA HAS $129-MIL. EXPOSURE TO LEHMAN ----------------------------------------------------------------- Bank of China Limited disclosed to the Stock Exchange of Hong Kong Limited on Sept. 17 that the Bank of China Group holds US$75.62 million bonds issued by Lehman Brothers Holdings Inc. and its subsidiaries, of which US$69.21 million bonds are held by Bank of China (Hong Kong) Limited. In addition, BOC's New York Branch has outstanding loans of US$50 million and US$3.2 million that were extended to Lehman Brothers Holding Inc. and its subsidiaries, respectively. Company Secretary Yeung Cheung Ying said the bonds and loans in aggregate account for 0.01% of the total assets and 0.19% of the net assets of the Bank of China Group as at 30 June 2008, respectively. The Bank says it will closely monitor the development of this event, promptly assess any risk in relation thereto, make corresponding provisions for diminution in value in a prudent manner, and safeguard our assets to the greatest extent in accordance with the relevant laws and regulations. It expects that this event will not have any significant impact on the financial position of the Bank of China Group. According to Xinuha News, The Group's shares dropped by the daily 10% limit on Tuesday and tumbled a further 6.31% on the next day in the yuan-denominated market. Jing Ulrich, chairwoman of China equities at JPMorgan Securities, told China Daily, "As China's financial market is not fully opened yet, the problem of Lehman Brothers is expected to have only an indirect impact on China's financial sector. An individual Chinese bank's exposure to the US financial crisis should be seen in the context of its total assets." ----------------------------------------------------------------- [00069] CHINA MERCHANTS BANK HAS $70-MIL. EXPOSURE TO LEHMAN ----------------------------------------------------------------- China Merchants Bank Co., Ltd., said in a filing with The Stock Exchange of Hong Kong Limited, said it holds bonds issued by Lehman Brothers, U.S. with an exposure of US$70 million, of which US$60 million was senior debt and US$10 million was subordinated bonds. As of Sept. 16, China Merchants has not, with respect to the Lehman bonds, made any provision for impairment losses. The bank intends to conduct a risk assessment on the bonds. ----------------------------------------------------------------- [00070] BOC HONG KONG HAS $69-MIL. EXPOSURE TO LEHMAN ----------------------------------------------------------------- The board of directors of BOC Hong Kong (Holdings) Limited (HKSE: 2388) disclosed in a filing with the Stock Exchange of Hong Kong, Ltd., that the company's exposure to bonds issued by Lehman Brothers Holdings Inc. and its affiliates is about US$69.21 million, comprising -- US$50 million senior unsecured bonds held by its wholly- owned subsidiary, Bank of China (Hong Kong) Limited and -- a HK$150 million senior unsecured bond held by its 51% owned subsidiary, BOC Group Life Assurance Company Limited. Jason C.W. Yeung, secretary, says the Group has not, with respect to the Lehman securities, included any provision for impairment losses in its published financial statements. The Group will consider making appropriate provisions in accordance with its accounting standards on a consistent basis and will make appropriate disclosure in accordance with regulatory requirements in due course. ----------------------------------------------------------------- [00071] CHINA'S ICBC HOLDS $152-MIL. BONDS RELATED TO LEHMAN ----------------------------------------------------------------- Industrial and Commercial Bank of China's mainland and overseas branches held a total of US151.8 million worth of bonds of or related to bankrupt bank Lehman Brothers, People Daily On Line News reports. The bank, the report relates, said it was considering to draw provisions for the said bonds. According to China Daily News, the bank directly had an exposure of US$139 million of advanced bonds, which would allow the lender to have priority in claiming over other bond and option holders in the bankruptcy of the issuer, while its Macao unit, Seng Heng Bank Limited, held US$12.81 million worth of bonds related to a Lehman Brothers trust. The bank said that the Lehman bankruptcy would not constitute a substantial impact on them. The bank, however, will still keep monitoring market changes, evaluate the risk of the said bonds and draw equivalent write-down provisions according to prudence principle, the Daily relates. The bond investment, the Daily relates, accounted for 0.03% of ICBC's total bond portfolio and 0.01% of its total assets, compared to figures in its 2008 half-year report. ICBC shares in the domestic stock market sank by the daily limit of 10% to CNY3.42 (50 US cents) on Wednesday. ICBC -- http://www.icbc.com.cn/ -- is the largest state-owned commercial bank, and is authorized by the State Council and the People's Bank of China. ICBC conducts operations across China as well as in major international financial centers. ----------------------------------------------------------------- [00072] BELGIUM'S KBC HAS EUR280-MIL. EXPOSURE TO LEHMAN ----------------------------------------------------------------- BRUSSELS, Belgium -- September 15, 2008 -- In view of the market turmoil and uncertainty caused by concerns over the American investment bank, Lehman Brothers, KBC Groep (EBR:KBC) wishes to detail its risk exposure to Lehman Brothers. As of this morning, KBC's risk exposure on Lehman was as follows: -- Bonds purchased: EUR145 million -- Credit facilities outstanding: EUR85 million (of which EUR30 million secured) Moreover, there is some indirect exposure included in the underlying assets of the CDOs in which KBC has invested. Stress tests are currently being run to compute the exact value at risk. The impact is expected to be below EUR50 million. Finally, KBC has a payment obligation towards Lehman Brothers, which is secured by collateral and results from professional transactions. The mark-to-market value accrued in favor of Lehman amounts to approximately EUR200 million. ----------------------------------------------------------------- [00073] PRUDENTIAL FINANCIAL HAS $223-MIL. EXPOSURE TO LEHMAN ----------------------------------------------------------------- Prudential Financial, Inc., said in a filing with the U.S. Securities and Exchange Commission that it expects to record an other-than-temporary impairment for the quarter ending Sept. 30, 2008, for securities issued by Lehman Brothers or its affiliates included in fixed maturities available for sale. Amortized cost of the securities as of Sept. 16, 2008, was approximately $99 million for its financial services businesses and approximately $18 million for its closed block business. Fair value at that date was approximately 34% and 32% of amortized cost, respectively. Prudential also disclosed that its financial services businesses also have investments with a fair value as of Sept. 16, 2008, of $8 million in debt securities issued by Lehman Brothers or its affiliates that are included in trading account assets supporting insurance liabilities. Prudential estimates these securities have declined in fair value by approximately $16 million during the quarter ending Sept. 30, 2008. Prudential estimates that as of Sept. 16, 2008 the financial services businesses had approximately $90 million of additional unsecured counterparty exposure to affiliates of Lehman Brothers in connection with derivatives transactions. It is currently executing an orderly settlement of these transactions and has replaced the derivative positions with various other counterparties. It is currently evaluating the recoverability of those unsecured amounts. Prudential expects these actions to result in a pre-tax charge to income from continuing operations before income taxes for the quarter ending September 30, 2008, which charge will be excluded from adjusted operating income. In the ordinary course of business, Prudential has also entered into other contractual and commercial arrangements with or involving Lehman Brothers. It is in the process of entering into replacement arrangements where appropriate and does not believe that any losses attributable to any of these arrangements would be material to the Company's results of operations or cash flows in any particular quarterly or annual period. ----------------------------------------------------------------- [00074] PHILIPPINES' EXPOSURE LIMITED; 3 BANKS SET ASIDE $38.5M ----------------------------------------------------------------- Three Philippine banks are allocating US$38,500,000 to cover exposures to Lehman Brothers Holdings, Inc. RCBC did not disclose the amount of its exposure to Lehman Brothers Holdings but said it is allocating PHP980 million (US$20.7 million) from its current excess reserves. "This is to ensure that any possible write-down that may result from this exposure will have been properly and fully provided for," RCBC said. RCBC stated that it has investments in structured products referencing Republic of the Philippines bonds, which have exposure to Lehman Brothers. The bank said the PHP980-million provisioning will have no adverse effect on RCBC's capital base. Metropolitan Bank & Trust Company disclosed that it has a direct exposure to Lehman bonds of US$20.4 million and made provisions equivalent to US$14 million using current market prices. Metro Bank also reported that it has loan exposure to a Lehman subsidiary based in the Philippines amounting to PHP2.4 billion (US$50.8 million). The loan status is current and the company is in normal operations. Despite this development, the bank says it is still on track with its income expectation for the whole year of 2008. Banco de Oro Unibank Inc. (BDO) also did not divulge its exposure to Lehman but said it is setting aside provisions totaling PHP3.8 billion (US$80.2 million) to cover its exposure to Lehman. The provisions will come from reallocation of excess reserves and from additional provisions in the current period. With these adjustments, BDO says that its balance sheet should be adequately covered from potential losses arising from its Lehman exposure. Despite these provisions, BDO still expects to post a reasonable net income for the year. Six other banks, namely Philippine Savings Bank, Security Bank Corp., UnionBank, China Banking Corporation, Bank of the Philippine Islands, and Export and Industry Bank, each said it has no direct or indirect exposure to Lehman Brothers. Export and Industry Bank assured shareholders that it has "no direct or indirect exposure to Lehman Brothers Holdings Inc., Merrill Lynch, AIG or other US investment banks adversely affected by the current market turmoil." Security Bank said it has a $10-million exposure to Merrill Lynch, but noted that the bond is being acquired by Bank of America. The Central Bank of the Philippines said in a statement that domestic banks' exposure to structured products, such as CLNs and CDOs, issued by investment houses like Lehman Brothers has been limited and are well cushioned by banks' capital base. "However, we continue to closely monitor developments in the global financial markets, including further risk aversion against emerging markets including the Philippines, as these may adversely impact the growth of the banking sector." ----------------------------------------------------------------- [00075] CONSTELLATION HAS TIES WITH LEHMAN, $2B-LOAN ON THE LINE ----------------------------------------------------------------- In a filing with the Securities and Exchange Commission, Constellation Energy Group, Inc., Constellation Energy Commodities Group, Inc. and Baltimore Gas and Electric Company disclosed that they have business relationships with subsidiaries of Lehman Brothers Holdings, Inc. Lehman is not currently engaged in any advisory capacity with Constellation or its subsidiaries. Constellation, Constellation Commodities and BGE believe the Lehman bankruptcy and the possible resulting effects on subsidiaries of Lehman will not have a material adverse effect on them. Constellation Commodities is a counterparty with Lehman Brothers Commodity Services Inc. and Eagle Energy Partners 1, LP, subsidiaries of Lehman, in wholesale energy marketing transactions. The obligations of Lehman Commodity Services and Eagle Energy are guaranteed by Lehman, and the Lehman bankruptcy filing gives Constellation Commodities the right to terminate the transactions. As of Sept. 15, 2008, Constellation Commodities did not have any direct net credit exposure to Lehman Commodity Services or Eagle Energy, based on existing contracts and current market prices. BGE has existing contracts with Eagle Energy for the purchase of gas for the 2008 winter period based on a first of the month index price. BGE does not have any material credit exposure under these contracts. BGE does not believe that the failure of Eagle Energy to perform under these contracts would have a material impact on its ability to meet its customers' gas requirements. Shearson Lehman Brothers, a Lehman subsidiary, acts as a remarketing agent for BGE on a $48 million Anne Arundel County tax exempt bond. The next remarketing under this bond issue is not scheduled until November. Constellation and BGE, however, said that they have aggregate credit facility commitments of $6.13 billion (not including a firm, underwritten commitment for an additional $2.0 billion credit facility that extends through December 2009) with a large consortium of banks, including Lehman Brothers Bank, a Lehman subsidiary. As of Sept. 15, Lehman Brothers Bank's total commitment within these credit facilities is $150 million. As of Sept. 15, Constellation had excess liquidity of about $2.0 billion, excluding the existing $150 million Lehman Brothers Bank commitment and excluding the firm, underwritten commitment for an additional $2.0 billion credit facility that is expected to close in October 2008. Constellation does not believe that the potential reduction in available capacity under the credit facilities would have a significant impact on its liquidity. Constellation, Constellation Commodities and BGE continue to closely monitor the Lehman bankruptcy situation closely and will weigh all legal rights appropriately to protect its rights under the various contractual relationships. The Wall Street Journal says that shares of Constellation dropped for two straight days after the disclosure. "You read the [SEC filing] and you can't find anything wrong ... but the suggestion that the credit line might get pulled -- that threat is enough to send things down," said Manny Weintraub, founder of Integre Advisors. Standard & Poor's placed its ratings on Constellation and subsidiary Baltimore Gas & Electric, including its 'BBB' corporate credit ratings, on CreditWatch with developing implications. According to S&P, of immediate concern is closing a $2 billion credit line that Constellation has negotiated with The Royal Bank of Scotland and The Union Bank of Switzerland. "There were concerns that this credit line could be cancelled." ----------------------------------------------------------------- [00076] 3 JAPANESE ASSET FIMS HAVE 65 FUNDS EXPOSED TO LEHMAN ----------------------------------------------------------------- Three major Japanese asset management firms, Nomura Asset Management Co., Daiwa Asset Management Co., and Nikko Asset Management Co., have a combined 65 funds with investments in shares and bonds of Lehman Brothers, Jiji Press reports. According to the report, the collapse of Lehman Brothers is likely to affect 11 funds managed by Nomura Asset, 26 by Daiwa Asset, and 28 by Nikko Asset. The proportion of Lehman-related securities in the funds ranges from less than 1% to 2%, the report notes. The Press says that the three firms run a total of 900 funds with money from individual investors. ----------------------------------------------------------------- [00077] NYSE SUSPENDS TRADING IN LEHMAN-RELATED SECURITIES ----------------------------------------------------------------- NEW YORK, New York -- September 17, 2008 -- NYSE Regulation, Inc. announced today that it determined that the common stock of Lehman Brothers Holdings, Inc., ticker symbol LEH, as well as the 13 related NYSE and NYSE Arca listed securities listed below, should be suspended immediately. NYSE Regulation has determined that the Company is no longer suitable for listing. This decision was reached in view of the Company's September 15, 2008, filing of a petition under Chapter 11 of the U.S Bankruptcy Code with the United States Bankruptcy Court for the Southern District of New York. NYSE Regulation noted the uncertainty as to the timing and outcome of the bankruptcy process as well as the ultimate effect of this process on the Company's equity holders. In this regard, we considered the Company's September 16, 2008, announcement regarding the definitive agreement signed with Barclays Capital to acquire substantially all of the North American business and operating assets of Lehman Brothers, Inc., a wholly-owned subsidiary, and certain related assets of the Company and its affiliates. NYSE Regulation also reviewed the abnormally low price of the common stock since the bankruptcy filing on September 15, 2008. The Company has a right to a review of this determination by a Committee of the Board of Directors of NYSE Regulation. Applications to the U.S. Securities and Exchange Commission to delist the issues are pending the completion of applicable procedures, including any appeal by the Company of the NYSE Regulation staff's decision. The NYSE noted that it may, at any time, suspend a security if it believes that continued dealings in the security on the NYSE are not advisable. Ticker Issuer Issue ------ ------ ----- LEH PR C Lehman Brothers Depositary Shares, (Each Representing Holdings, Inc. One-Tenth Interest in a Share of 5.94% Cumulative Preferred Stock, Series C) LEH PR D Lehman Brothers Depositary Shares (Each representing Holdings, Inc. 1/100th of a share of 5.67% Cumulative Preferred Stock, Series D) LEH PR F Lehman Brothers Depositary Shares (Each representing Holdings, Inc. 1/100th of a share of 6.50% Cumulative Preferred Stock, Series F LEH PR G Lehman Brothers Depositary Shares (Each representing Holdings, Inc. 1/100th of a share of Floating Rate Cumulative Preferred Stock, Series G) LEH PR J Lehman Brothers Depositary Shares (Each Representing Holdings, Inc. One One-Hundreth of a share of 7.95% Non-Cumulative Perpetual Preferred Stock, Series J) LEH PR P Lehman Brothers 7.25% Non-Cumulative Perpetual Holdings, Inc. Convertible Preferred Stock, Series P LEH12B Lehman Brothers Lehman Brothers Holding Floating Rate Holdings, Inc. MCAPS LEH12C Lehman Brothers Lehman Brothers Holdings 5.857% MCAPS Holdings, Inc. PPE* Lehman Brothers Opta Exchange-Traded Notes due Holdings, Inc. February 25, 2038 Linked to the S&P Private Equity Index Net Return LEH PR K Lehman Brothers 6.375% Preferred Securities, Series K Holdings Capital Trust III LEH PR L Lehman Brothers 6.375% Preferred Securities, Series L Holdings Capital Trust IV LEH PR M Lehman Brothers 6.00% Preferred Securities, Series M Holdings Capital Trust V LEH PR N Lehman Brothers 6.24% Preferred Securities, Series N Holdings Capital Trust VI * Listed on NYSE Arca. The other 12 securities are listed on NYSE. ----------------------------------------------------------------- [00078] AUSTRALIA EXCHANGE SUSPENDS LEHMAN'S CLEARING SERVICES ----------------------------------------------------------------- SYDNEY, Australia -- Sept. 15, 2008 -- The Australian Securities Exchange (ASX) has been advised today that third-party clearers have terminated their clearing services for Lehman Brothers Australia Limited. Consequently, in the absence of clearing arrangements, Lehman Brothers Australia has had its status as an ASX Market Participant suspended immediately, under the terms of ASX's Operating Rules. The third-party clearers - Citi Securities Clearing Australia and Berndale Securities -- have committed to meet obligations on behalf of Lehman Brothers Australia for all unsettled, novated transactions. Lehman Brothers Australia is not a Trading Participant on the SFE market or a Clearing Participant on either of ASX's two central counterparty clearing houses - ACH (cash) and SFECC (futures). Consequently, neither ACH nor SFECC has any direct exposure to Lehman Brothers Australia or to the wider Lehman Brothers group. In addition, Lehman Brothers Australia is not an ASTC Settlement Participant and does not directly participate in ASX's daily batch settlement process. All on-market trades, regardless of the broker that transacted them, are novated by ASX's clearing houses, guaranteeing the performance of the trades. ASX's clearing houses continue to monitor the clearing exposures and related risk management activities of their Clearing Participants to ensure the ongoing compliance of Participants with their obligations. Settlement completed as normal for the whole market today. Attached is the ASX Circular sent to Participants. ----------------------------------------------------------------- [00079] LEHMAN BOMBAY CONTINUES TRADING IN CASH SEGMENT ----------------------------------------------------------------- The Bombay Stock Exchange Ltd. said that Lehman Brothers Securities Pvt. Ltd. (LBSPL) is one of the trading cum clearing members in the cash segment of the BSE. There are no outstanding open positions/settlement obligations of LBSPL currently in the cash market segment, the BSE said. "The member shall continue to operate in the cash market segment on pre-pay-in before their trades." ----------------------------------------------------------------- [00080] LEHMAN HALTS IN LONDON EXCHANGE, TAGGED AS "DEFAULTER" ----------------------------------------------------------------- London's Head of Trading Services Nick Bayley issued a notice on Sept. 15, 2008, declaring Lehman Brothers International (Europe) to be a defaulter pursuant to and in accordance with paragraph D100 of the Rules of the London Stock Exchange. Lehman Brothers International (Europe) informed the Exchange on September 15 that it will not be trading on Exchange until further clarification of its position. The Exchange is required to have default rules in place to facilitate but not effect settlement of unsettled trades for on- Exchange market contracts. The default rules, incorporating rules D010 to D200 inclusive, are available at: http://www.londonstockexchange.com/en-gb/products/membershiptrading/rulesreg/ruleslse/ Euroclear UK and Ireland (CREST) has suspended settlement in all trades that were to be settled through its facilities. The Exchange has received enquiries London Stock Exchange plc Registered in England & Wales No 2075721 from member firms as to the default process for trades, including those conducted on the International Order Book that are settled through DTCC and Euroclear Bank. The Exchange confirms that all trades, including those on the IOB, are subject to its default rules and protocol. ----------------------------------------------------------------- [00081] HONG KONG SUSPENDS LEHMAN BROTHERS TRADING ----------------------------------------------------------------- Hong Kong Futures Exchange Limited (HKFE), a wholly-owned subsidiary of Hong Kong Exchanges and Clearing Limited (HKEx), has suspended the trading of Lehman Brothers Futures Asia Limited in its markets after today's afternoon session ended. Lehman Brothers Futures Asia Limited's right to access HKATS, the Hong Kong Futures Automed Trading System, and the firm's HKFE Participantship have been suspended until further notice under HKFE Rule 706. As a result of the suspension of the HKFE Participantship of Lehman Brothers Futures Asia Limited, HKFE Clearing Corporion Limited (HKCC), a wholly-owned member of the HKEx Group, has suspended Lehman Brothers Futures Asia Limited's HKCC Participantship until further notice under Rule 510 of the HKCC Rules. HKSE also announced the suspension effective 9:30 a.m. on Sept. 16 of trading in all the structured products issued by Lehman Brothers Holdings Inc. ----------------------------------------------------------------- [00082] LEHMAN COLLAPSE WON'T HURT JAPAN BANK'S RATINGS, SAYS S&P ----------------------------------------------------------------- Standard & Poor's said the collapse of Lehman Brothers Holdings Inc., will not have immediate impact on Japanese financial institutions ratings. In a statement, Standard & Poor's said that the Japanese financial institutions have only limited exposure to the Lehman Brothers group. "The highest exposure for a single entity, as a percentage of net worth, was 3.8 percent, which is manageable," it said. Court filings submitted by Lehman Brothers listed Japanese banks as some of its largest creditors, which include Aozora Bank and Mizuho Corporate Bank Ltd. Aozora has been listed as the company's third largest creditor which is reportedly owed about $463,000,000. It is followed by Mizuho which is owed about $289,000,000 in bank loan. Standard & Poor's, however, said that the Japanese financial companies may still be affected indirectly by disturbances in the world market. As of Sept. 17, Japan's lenders disclosed a total of JPY202.5 billion (US$1.9 billion) in potential losses. Most of the assets at risk are in the form of loans and bonds, according to a report by Bloomberg. ----------------------------------------------------------------- [00083] SEC WORKS WITH OTHER REGULATORS TO PROTECT LEHMAN CLIENTS ----------------------------------------------------------------- WASHINGTON, D.C. -- Sept. 15, 2008 -- The decision by Lehman Brothers Holdings Inc. to file for protection under Chapter 11 of the bankruptcy laws is expected to lead to the winding down of Lehman Brothers Inc., its U.S. regulated broker-dealer, outside of bankruptcy. The accounts of Lehman's U.S. retail securities customers are with the broker-dealer. In cases such as this, Lehman Brothers' customers will benefit from their extensive protections under SEC rules, including segregation of customer securities and cash as well as insurance by the Securities Investor Protection Corporation. These safeguards are designed to ensure that a broker-dealer's customers will be protected. In the weeks ahead, SEC staff who have been on-site at the U.S. broker-dealer will remain in place to oversee the orderly transfer of customer assets to one or more SIPC-insured brokerage firms. The holding company bankruptcy filing does not affect in any way the SIPC protection applicable to the firm's customers. The SEC is also coordinating with overseas regulators to protect Lehman's customers and to maintain orderly markets. "For several days, we have worked closely with regulators around the world including the FSA in the United Kingdom, the BaFin in Germany, and the FSA in Japan, as well as our counterparts in other markets around the world, to coordinate our actions in the interest of orderly markets," said SEC Chairman Christopher Cox. "In doing so we have also worked closely with the Treasury and the Federal Reserve and market participants. We are committed to using our regulatory and supervisory authorities to reduce the potential for dislocations from Lehman's unwinding, and to maintain the smooth functioning of the financial markets." In furtherance of these objectives, the SEC is focused on ensuring that customers of the U.S. broker-dealer, which is not part of the bankruptcy filing, remain protected through, among other means, enforcing continued compliance with the SEC net capital and customer asset protection rules, and with SEC requirements that the U.S. broker-dealer conduct its affairs so as to minimize the effect of the holding company's bankruptcy on customers, and that it ensure access to customer cash and securities. In the meantime, Lehman Brothers Holdings Inc. will continue to operate while the bankruptcy process facilitates the reconciliation of claims and the realization of value from its assets in an orderly fashion. Customers of Lehman Brothers Inc. may contact the SEC's Office of Investor Education and Advocacy for individual assistance at help@sec.gov ----------------------------------------------------------------- [00084] STANDARD & POOR'S DOWNGRADES LEHMAN-RELATED SECURITIES ----------------------------------------------------------------- Standard & Poor's Ratings Services on Sept. 17 and 18 took actions, including ratings downgrades, on various securities that have ties to Lehman Brothers Holdings, Inc., or its units. Standard & Poor's: * lowered its ratings on eight Asia-Pacific Synthetic CDOs and placed 42 Synthetic CDOs on CreditWatch with negative implications after the downgrade of Lehman Bros. (D/--/D) on Sept. 16, 2008. * lowered its ratings on 10 Lehman Bros. Holdings Inc. (LBHI)- related and one Lehman Bros. Inc.-related repackaged securities transactions. * placed its ratings on 122 tranches from 38 U.S. cash flow and hybrid collateralized debt obligation (CDO) transactions and 123 tranches from 43 U.S. synthetic CDO transactions on CreditWatch with negative implications. * lowered its short-term ratings on nine Lehman Brothers Inc. liquidity facility-backed issues and placed them on CreditWatch with developing implications. * took credit rating actions on 422 tranches in European securitizations following recent rating actions on Lehman Brothers Holdings and related entities: - 381 ratings have been placed on CreditWatch with negative implications. - 2 ratings have been lowered. - 22 ratings remain on CreditWatch negative. - 17 ratings have been affirmed. * lowered its ratings on eight tranches from four U.S. collateralized debt obligation (CDO) transactions, which portfolios consist wholly or in part of participation interests in senior secured, second-lien, and senior unsecured loans and bonds, with various subsidiaries of Lehman Bros. Holdings acting as participation and/or swap counterparties: Rating ---------- Class To From ----- -- ---- Spruce CCS Ltd. Sr notes CC A Spruce CCS Ltd. Mezz notes CC B+ Verano CCS Ltd. Sr notes CC A- Verano CCS Ltd. Mezz notes CC B Pine CCS Ltd. A-1 CC A- Pine CCS Ltd. A-2 CC A- Pine CCS Ltd. B CC B Kingfisher Capital CLO A CC BBB+ * lowered its rating on class A from SASCO 2008-C2 LLC, a commercial real estate collateralized debt obligation (CRE CDO) transaction, to 'CC' from 'A', in light of the partial dependence of SASCO 2008-C2 LLC' rating on the rating of the sellers, Lehman Bros. Holdings Inc. (D/--/D) and Lehman Bros.-Lehman CP Inc. (A-1+). The CreditWatch placements and the downgrades follow the recent rating actions taken by S&P on various Lehman Bros. entities -- Lehman Bros. Holdings Downgraded To 'Selective Default'; Other Lehman Entities To 'BB-' Or 'R'," published Sept. 15, 2008, and "Research Update: Lehman Brothers Holdings Inc. Rating Lowered To 'D'," published Sept. 16, 2008. ----------------------------------------------------------------- [00085] S&P REPORTS OF LEHMAN IMPACT ON EUROPEAN BANKS ----------------------------------------------------------------- LONDON, England -- Sept. 16, 2008 -- The Chapter 11 filing of Lehman Brothers Holdings Inc. (LBHI; SD/--/SD) on Sept. 15, 2008, is a seismic event in the global financial markets, Standard & Poor's Ratings Services noted in a report titled "Lehman Brothers -- Assessing The Immediate Consequences For European Banks," published today on RatingsDirect. In the above-mentioned article, we consider the implications of the filing for the European banking sector. "In summary, the information that we have received so far indicates that European banks' direct net exposures to LBHI and its subsidiaries are generally moderate and manageable," said Standard & Poor's credit analyst Nick Hill. "This conclusion principally reflects the widespread use of credit mitigation techniques such as netting, collateral management, and margin calls," he added. A more significant factor is likely to be a fall in asset prices as Lehman entities unwind trading positions and manage down their balance sheets. This could lead to further material write-downs in certain European banks' third-quarter earnings. It is too early to assess the scale of this effect. "In certain cases, it could result in rating actions once further information becomes available," said Mr. Hill. The report is available to subscribers of RatingsDirect, the real-time Web-based source for Standard & Poor's credit ratings, research, and risk analysis, at http://www.ratingsdirect.com. If you are not a RatingsDirect subscriber, you may purchase a copy of the report by calling (1) 212-438-9823 or sending an e-mail to research_request@standardandpoors.com. Ratings information can also be found on Standard & Poor's public Web site at http://www.standardandpoors.com; select Ratings in the left navigation bar, then Credit Ratings Search. Alternatively, call one of the following Standard & Poor's numbers: Client Support Europe (44) 20-7176-7176; London Press Office (44) 20-7176-3605; Paris (33) 1-4420-6708; Frankfurt (49) 69-33-999-225; Stockholm (46) 8-440-5914; or Moscow (7) 495-783-4017. Standard & Poor's, a division of The McGraw-Hill Companies (MHP: The McGraw-Hill Companies, Inc., is the world's foremost provider of financial market intelligence, including independent credit ratings, indices, risk evaluation, investment research and data. With approximately 8,500 employees, including wholly owned affiliates, located in 23 countries and markets, Standard & Poor's is an essential part of the world's financial infrastructure and has played a leading role for more than 140 years in providing investors with the independent benchmarks they need to feel more confident about their investment and financial decisions. For more information, visit http://www.standardandpoors.com/ ----------------------------------------------------------------- [00086] NEUBERGER BERMAN, ET AL., CONTINUE OPERATIONS ----------------------------------------------------------------- See prior entry at [00014]. In a Sept. 17, 2008, filing with the Securities and Exchange Commission, Neuberger Berman Management LLC, Neuberger Berman, LLC and Lehman Brothers Asset Management LLC said they will continue to operate in the ordinary course of business as the investment manager/sub-adviser of the Neuberger Berman/Lehman Brothers Funds. This is notwithstanding the Chapter 11 filing of Lehman Brothers Holdings Inc., which wholly owns Neuberger Berman Management LLC (formerly, Neuberger Berman Management Inc.), Neuberger Berman, LLC and Lehman Brothers Asset Management LLC. Neuberger Berman Management LLC, Neuberger Berman, LLC and Lehman Brothers Asset Management are separate legal entities and are not included in the bankruptcy filing. Neuberger Berman -- http://www.nb.com/ -- also noted that all mutual fund assets are segregated from Lehman Brothers and are held by the custodian, State Street Bank & Trust. NB's Letter to Clients Nuberger Berman, LLC 605 Third Avenue New York, NY 10158-0180 Tel 212.476.9000 Dear [client]: We write to affirm that Neuberger Berman continues to conduct business as usual and is not subject to the bankruptcy proceedings of its parent, Lehman Brothers Holdings Inc. Importantly, Neuberger Berman provides for the continuity of the portfolio management teams, research and operating functions, all of which remain intact going forward. Accordingly, as your investment advisor, we continue to trade and manage your portfolios per your investment guidelines. Since our inception nearly 70 years ago, we have worked with one goal: to build and protect the wealth of our clients. Today Neuberger Berman manages approximately $125 billion in assets, a reflection of a legacy of experience across market cycles and our unwavering commitment to our clients. You undoubtedly have questions about what this means for your account and we are anxious to answer them. In the meantime, please consider the following important points: - Your fully paid for securities are segregated from assets of Lehman Brothers and are not available to general creditors of Lehman Brothers; - With respect to those for whom we custody assets, you have free and unhampered access to these assets; - It is our intent to expedite the implementation of a bulk transfer of assets custodied at Lehman Brothers to a new, unaffiliated service provider. As previously announced, we are in advanced discussions with a number of potential partners to sell a stake of the Investment Management Division, which includes Neuberger Berman. These discussions are proceeding. These are extraordinary times in the financial markets. Please be assured that your portfolio manager will be closely monitoring your account in this volatile market environment, taking whatever actions he or she deems appropriate with respect to any securities transactions on your behalf. We will stay in close communication with you as we move forward. If you have any questions about current market conditions or your portfolio, please do not hesitate to contact us. Sincerely, Joseph V. Amato Chief Executive Officer Neuberger Berman LLC NB's Letter to Financial Professionals Nuberger Berman, LLC 605 Third Avenue New York, NY 10158-0180 Tel 212.476.9000 Dear Client: We write to affirm that Neuberger Berman and Lehman Brothers Asset Management ("LBAM") continue to conduct business as usual and are not subject to the bankruptcy proceedings of their parent, Lehman Brothers Holdings Inc. Importantly, LBAM and Neuberger provide for the continuity of the portfolio management teams, research and operating functions, all of which remain intact going forward. Accordingly, we continue to manage your client's portfolios and our mutual funds in accordance with their investment management agreement and as stipulated by their investment guidelines. We have great confidence in the depth, experience, and talent of our portfolio management teams. We continue to strive to achieve strong absolute and benchmark relative performance for our clients, as we have done since our inception. Today we manage over $273 billion in client assets, a reflection of a legacy of experience across market cycles and our unwavering commitment to our clients. You undoubtedly have more questions about what this means and we are anxious to answer them. These are extraordinary times in the financial markets. Please be assured that your portfolio management team will be closely monitoring their portfolios in this volatile market environment, taking whatever actions he or she deems appropriate. We will stay in close communication with you as we move forward. If you have any questions about current market conditions or your portfolio, please do not hesitate to contact us. Sincerely, Joseph V. Amato Ken Umezaki Global Head, Asset Management Deputy Head, Global Asset Management ----------------------------------------------------------------- [00087] LEHMAN WITHDRAWS AS ADVISER TO CITIC INT'L PRIVATIZATION ----------------------------------------------------------------- Lehman Brothers Asia Limited has withdrawn as financial adviser to Gloryshare Investments Limited in connection with the proposed privatization of CITIC International Financial Holdings Limited. Lehman Brothers Asia has asked Gloryshare, a unit of CITIC group, to seek a replacement advisor after the Stock Exchange of Hong Kong, Ltd., issued restriction notices on four Hong Kong-based Lehman Brothers entities, after Lehman Brothers Holdings, Inc., filed for Chapter 11 protection in the U.S. Morgan Stanley Asia Ltd has replaced Lehman effective Sept. 17 as financial advisor. Lehman Brothers was formally retained by Gloryshare in June 10, 2008, but has been making a number of proposals to CITIC group in connection with the transaction since 2007. The terms of the privatisation proposal envisaged that Banco Bilbao Vizcaya Argentaria S.A., presently a substantial shareholder of CIFH, would increase its shareholding interest in CIFH from about 15% to 30%, the balance of the shares in CIFH being held by the offeror or members of its group. The proposal has not been accepted by CIFH shareholders. In late August 2008, CITIC group beefed up its offer by boosting proposed cash payments by US$493.2 million, offering HKD2.16 per share plus one China CITIC Bank Corp Ltd H share for each CIFH share. CITIC group originally offered one CNCB CITIC Bank Corp H share plus HKD1.46 cash for each CIFH share. Jones Day is the adviser to CIFH, and Linklaters is the adviser to Banco Bilbao. ----------------------------------------------------------------- [00088] 3 LEHMAN DIRECTORS DISPOSED OF SHARES ON PETITION DATE ----------------------------------------------------------------- Three directors of Lehman Brothers Holdings Inc., filed with the U.S. Securities and Exchange Commission statements of changes in beneficial ownership of Lehman common stock after they disposed of their shares on the day Lehman filed for bankruptcy protection. Richard Fuld Jr., chief executive officer and director, disclosed that he beneficially owns 21,040,914 shares of the company's common stock after disposing of 2,878,302 shares on Sept. 15, 2008. He further said that some of these shares are held in various benefit plans. Thomas Cruikshank disclosed that he beneficially owns 5,000 shares of the company's common stock after disposing of 28,000 shares on Sept. 15, 2008. Meanwhile, Henry Kaufman reported a zero beneficial securities ownership after he disposed of 5,000 shares of the company's common stock on the same date. *** End of Issue No. 4 ***