================================================================= LEHMAN BROTHERS BANKRUPTCY NEWS Issue Number 5 ----------------------------------------------------------------- Copyright 2008 (ISSN XXXX-XXXX) September 20, 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 ------------- [00089] LEHMAN WINS COURT NOD ON SALE OF U.S. UNITS TO BARCLAYS [00090] SIPC COMMENCES LIQUIDATION PROCCEDINGS AGAINST LBI [00091] CONTRACTS ASSIGNED TO BARCLAYS AS PART OF LBI SALE [00092] DEBTORS' MOTION FOR RULING ON CITIBANK'S $28B ADVANCES [00093] DEBTORS' MOTION TO BORROW $450 MILLION FROM BARCLAYS BANK [00094] COMMITTEE SELECTS FTI AND HOULIHAN AS FINANCIAL ADVISORS [00095] BARCLAYS MAY ACQUIRE LEHMAN ASSETS IN EUROPE AND ASIA [00096] LEHMAN MULLS SALE OF INVESTMENT MGT. UNIT TO BAIN/HELLMAN [00097] SUMITOMO MITSUI DENIES SALE TALKS WITH LEHMAN [00098] LEHMAN TO SELL $8-MIL. STAKE IN GUYANA HOTEL [00099] TREASURY & FED PLAN TO BAILOUT BANKS SANS LEHMAN COLLAPSE [00100] SEC CURBS SHORT SELLING AFTER LEHMAN COLLAPSE [00101] GERMAN BANK SENDS $426MM TO LEHMAN ON PETITION DATE [00102] FREDDIE MAC HAS $1.2-BIL. UNSECURED CLAIM AGAINST LEHMAN [00103] JAPAN'S SUMITOMO MITSUI HAS $980-MIL. EXPOSURE TO LEHMAN [00104] WACHOVIA CORP. HAS $494-MIL. EXPOSURE TO LEHMAN [00105] BANK OF AMERICA HAS $400-MIL. EXPOSURE TO LEHMAN [00106] HARTFORD FINANCIAL HAS $332-MIL. EXPOSURE TO LEHMAN [00107] ISRAEL'S LEUMI HAS $88-MIL. EXPOSURE, FREZES $105-MIL. [00108] TORCHMARK HAS $82-MIL. EXPOSURE TO LEHMAN [00109] CHINA'S BANK OF COMM. HAS $70-MIL. BONDS EXPOSURE [00110] CHINA'S SKYFAME REALTY ISSUED $44-MIL. NOTES TO LEHMAN [00111] FRANCE'S SCOR SE HAS EUR35-MIL. EXPOSURE TO LEHMAN [00112] MEXICO'S BANORTE TAKES ON $20-MIL. LOSS ON LEHMAN NOTES [00113] GLG HAS IMMATERIAL EXPOSURE; LEHMAN HAS 13.7% STAKE [00114] 7 PHILIPPINE BANKS HAVE $386-MIL. EXPOSURE TO LEHMAN [00115] VENEZUELA MAY LOSE $225MM IN INVESTMENTS ON LEHMAN NOTES [00116] CONTINENTAL HAS FUEL HEDGES WITH LEHMAN BROTHERS [00117] GLAXOSMITHKLINE DEAL WITH LEHMAN FINANCE TERMINATED [00118] TEXAS STATE CUTS SERVICE CONTRACTS WITH LEHMAN AFFILIATE [00119] MARK SHAFIR OF LEHMAN'S MERGER & ACQUISITION JOINS CITI [00120] TWO KEY LEHMAN BROKERS MAY JOIN CREDIT SUISSE [00121] RESERVE PRIMARY FUND SUED AFTER $785M LEHMAN EXPOSURE [00122] NEW JERSEY PENSION FUND MAY SUE LEHMAN FOR $115-MIL. LOSS [00123] PUTNAM HAS NO EXPOSURE TO LEHMAN, CLOSES MARKET FUND [00124] LEHMAN BROTHERS SHAKES GAMING SECTOR [00125] LEHMAN U.K. CASE MORE COMPLEX THAN ENRON'S, SAYS PWC [00126] SKYPOWER, LEHMAN UNIT, STAYS IN BUSINESS [00127] RULE 2019 STATEMENT - Willkie Farr & Gallagher LLP [00128] FITCH ASSIGNS RECOVERY RATINGS TO LEHMAN SUBSIDIARIES [00129] FITCH WITHDRAWS AAA/VI+ RATINGS TO CERTAIN LEHMAN FUNDS [00130] FITCH'S RATINGS ON LEHMAN NO EFFECT ON RADAMANTIS [00131] FITCH ASSESSES IMPACT OF LEHMAN BANKRUPTCY ON CDO RATINGS [00132] FITCH REVIEWS U.S. SF TRANSACTIONS EXPOSURE TO LEHMAN [00133] FITCH SAYS 87 FUNDS INSULATED FROM EXPOSURE TO LEHMAN [00134] FITCH AFFIRMS LEHMAN DERIVATIVE PRODUCTS' AAA RATINGS [00135] FITCH PLACES LEHMAN FINANCIAL PRODUCTS ON WATCH NEGATIVE [00136] FITCH TO ASSESS LEHMAN EXPOSURE IN JAPANESE SF DEALS [00137] FITCH TO REVIEW TENDER OPTION BONDS WITH LEHMAN LIQUIDITY [00138] FITCH ASSESSES LEHMAN EXPOSURE IN 31 EUROPEAN RMBS DEALS [00139] MOODY'S RATES CREDIT DERIVATIVE DEALS EXPOSED TO LEHMAN [00140] MOODY'S PUTS RMBS AND ABS DEALS WITH LEHMAN ON DOWNGRADE [00141] MOODY'S SETS 13 MARKET MONEY FUNDS' RATINGS UNDER REVIEW [00142] MOODY'S DOWNGRADES TRANSACTIONS EXPOSED TO LEHMAN [00143] MOODY'S PLACES 40 EUROPEAN RMBS' RATINGS FOR DOWNGRADE [00144] MOODY'S REVIEWS 8 EMEA ABS DEALS'RATINGS FOR DOWNGRADE [00145] MOODY'S PUTS 3 JAPANESE CMBS DEALS' RATINGS FOR DOWNGRADE [00146] MOODY'S REVIEWS LEHMAN'S BANKRUPTCY IMPACT ON RATINGS [00147] MOODY'S PUTS LEHMAN 2007-LLF C5'S RATINGS FOR DOWNGRADE [00148] MOODY'S PUTS LEHMAN BROTHERS DERIVATIVE PRODUCTS ON WATCH [00149] S&P LOWERS RATINGS ON 8 ASIA-PACIFIC CDO, 42 UNDER WATCH KEY DATE CALENDAR ----------------- 09/15/08 Voluntary Petition Date 09/16/08 U.S. Trustee Appoints Creditors' Committee 09/19/08 Court Approves $1.7-Bil. Sale of LBI 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 ----------------------------------------------------------------- [00089] LEHMAN WINS COURT NOD ON SALE OF U.S. UNITS TO BARCLAYS ----------------------------------------------------------------- See prior related entries at [00057] (Debtors' Motion to Sell LBI to Barclays for $1.7 Billion), [00058] (Court Agrees to Rush- Sale, to Hold Sale Hearing Sept. 19), and [00034] (Barclays Inks $1.75B Deal to Buy Lehman's Key U.S. Units). Judge James M. Peck of the U.S. Bankruptcy Court for the Southern District of New York approved Lehman Brothers Holdings, Inc.'s request to sell Lehman Brothers, Inc., which runs its U.S. brokerage assets, two days after the proposal was submitted to the Court, and five days after the Holding company entered chapter 11. The Sale Hearing concluded at approximately 1:40 a.m. Saturday morning with, literally, a round of applause in Judge Peck's courtroom. Despite a limited opportunity to stop the sale, about 90 parties filed objections in Court, and many more packed the courtroom in order to, among other things, seek a delay or clarifications regarding the deal. Creditors called for a delay of the sale to accommodate competing bids for LBI and to seek disclosure about their billions of claims and collateral affected by the rush- sale. The Official Committee of Unsecured Creditors, however, did not file an objection, citing that there was no viable alternative. Representatives of the Federal Reserve, the U.S. Treasury Department, the Securities and Exchange Commission and the Office of the U.S. Trustee arrived in Court to urge the Judge Peck to approve the $1.7-billion sale, arguing the global financial markets would be harmed by a delay. Judge Peck approved the deal and acknowledged that rejecting the sale "could prove to be truly disastrous" given the 10,000 jobs and billions of customer accounts at stake. Harvey Miller, Esq., at Weil Gotshal & Manges, LLP, said a rejection of the deal would have resulted to a "major shock to the financial system." He said said there were accounts totaling $138 billion that depended on the sale. Courtroom observers gasped Friday when Mr. Miller announced that LBI has $47.4 billion of securities and $45.5 billion of liabilities to be assumed by Barclays, or a net value of $1.9 billion -- a reduction from the $72 billion in securities and $68 debts, or a net value of $4 billion. Lehman's headquarters building in New York and two data centers in New Jersey were valued at $1.29 billion -- a reduction of up to $200 million from earlier estimates. Barclays will also assume as much as $2.5 billion in liabilities related to Lehman workers, 10,000 of whom are to be absorbed by Barclays, and about $1.5 billion in costs for altering contracts. The facts, Mr. Miller told Judge Peck, show that the ice cube's melting. If the Barclays transaction isn't approved now, Mr. Miller stressed, there won't be any business left to sell to anybody. "The old deal had Barclays giving Lehman the first $500 million in profit on sales of some assets and splitting the profit on next $500 million," The Wall Street Journal reported. "In the new deal that is gone." LBI and other units that were not part of the Chapter 11 filing were included in the sale. The Securities Investor Protection Corp. began a liquidation proceeding Sept. 19 that would pave way for the sale of LBI. James W. Giddens, who was appointed as trustee for the SIPA liquidation of LBI on Sept. 19, says that after reviewing the Asset Purchase Agreement, having made reasonable inquiries, and on the understanding that the SIPC, SEC, and the Fed, among others, support the transaction, he has determined that the course of action is in the best interests of LBI's customers, creditors, and the general estate. Rich Ricci, Barclays' asset management and investment banking chief operating officer, will be chief executive officer of LBI for about three months, to oversee the integration. The courtroom broke into applause when the sale hearing closed at 12:41 a.m. New York time, after it started at 4 p.m. The sale has been approved only five days after Lehman Brothers petitioned for Chapter 11, which caused financial turmoil around the globe. Judge Peck approved the sale despite arguments by creditors that the sold assets could fetch more from competing bidders and that Lehman failed to provide adequate disclosure about the specific assets and debts included in the transaction. Creditors Seek Due Process, Say Approval Is Premature An informal group of unidentified LBHI bondholders represented by Akin Gump Strauss Hauer & Feld LLP said while they are aware of the extraordinary circumstances that led to the bankruptcy filing, these exigencies do not justify approval of the sale at this time. The Informal LBHI Bondholder Group complained that the Debtors have not "(a) engaged in a formal marketing process focused on the specific assets to be sold or (b) considered other potential viable alternatives to maximize the value of their estates in this changing economic climate." The Bondholders said the Debtors have not satisfied the objective set forth in bankruptcy law that they obtain the highest price or greatest overall benefit possible for the estate. The Bondholders noted that LBHI acknowledged that: (a) the specific assets to be soled were never marketed other than in the context of a sale of the entire Lehman enterprise; (b) the Federal Reserve, and not them, brokered the sale of the Purchased Assets to Barclays; and (c) since Barclays was identified as the proposed purchaser, no effort have been made by anybody to obtain higher and better offers for the purchased assets. The Bondholders said that the Debtors' failure to engage in proper sale and marketing process for LBI and other purchased assets, and the recent positive events for the nation's economy warrant the disapproval of the sale. Parties have noted that U.S. Treasury and the Federal Reserve have committed to draft a bail out plan aimed at forming an agency to absorb bad debt of banks and brokerages. U.S. stocks have rebounded Friday following the bailout announcement. Hedge fund Harbinger Capital Partners and its affiliates, owed at least $250,000,000 by Lehman Brothers Special Financing, Inc., a non-debtor registered broker-dealer of LBI, argued that the sale was not justified. Harbinger, which said that the debt was guaranteed by LBHI, noted that LBI has not been placed into any proceedings under Chapter 11 or SIPA and hence creditors have no basis on which to assess the proposed sale. Harbinger Funds asked the Court to withhold approval of the proposed sale until the sellers disclose the fundamental financial details necessary to determine the fairness of the transaction. The SIPC commenced SIPA proceedings for LBI on Sept. 19, the same day the Bankruptcy Court approved the sale of LBI. Judge Peck rejected the Bondholders' requests for delay based on their optimism. Creditors Ask on Billions of Collateral JPMorgan Chase Bank, N.A., the principal clearing bank for LBI, handles a large volume of securities, cash and other transactions for LBI's benefit and makes substantial advances for LBI's benefit on a daily basis. According to Amy R. Wolf, Esq., at Wachtell, Lipton, Rosen & Katz, in New York, as of Friday morning, JPMC had an outstanding advance of $15.8 billion under their Clearance Agreement and an outstanding "fail advance" of $7.4 billion made after the close of trading on Sept. 18. She noted that all advances are secured by cash and securities in accounts held by JPMC, which if lifted, will result to JPMC not adequately protected for the advances. "To the extent that the Debtor proposes to sell any of the LBI Collateral to Barclays, it must first discharge any outstanding advances made by JPMC that are secured by the LBI Collateral, and ensure that JPMC is relieved of any further obligations to make advances," she said. DCI Umbrella and Lehman Brothers International (Europe) are parties to a 1992 ISDA Master Agreement dated July 8, 2005. DCI said that Lehman has defaulted Sept. 15, and it has sought delivery of the collateral pledged in connection with the agreement. DCI said that, after reviewing the definitions in the APA, it was unable to determine with certainty whether its collateral is included or excluded from the sale. The Walt Disney Company said it won't object to the proposed sale if LBH makes clear that it is not transferring assets of Lehman Brothers Commercial Corporation free and clear of claims of TWDC and its affiliates. LBCC allegedly owes $107 million worth of foreign currencies to TWDC, which are guaranteed by Lehman Brothers Holdings. RBC, et al., Fight Inclusion of Non-Debtors, Want Proceeds Frozen Wells Fargo Bank, N.A., which asserts claims on account of ISDA master agreements against LBHI and its non-debtor units, noted that the Debtors are "attempting to sell unidentified assets of various unindentifed, non-debtor subsidiaries and affiliates for an unidentified purchase price." Wells Fargo said that while it does not want to impede the Barclays sale, the Debtors should provide complete information to creditors. Scott D. Talmadge, Esq., at Kaye Scholer LLP, in New York, noted that with the exception of LBI, non-debtor entities are not even parties to the APA. Martin J. Bienenstock, Esq., at Dewey & Leboeuf LLP, in New York, who represents Royal Bank of Scotland plc and ABN ABN AMRO NV, said that at the Sept. 17 hearing, the Debtors' representatives informed RBS that assets of non-debtor units were not being sold and references of the subsidiaries' assets being included in the APA were erroneous. However, Mr. Bienenstock says that as of Sept. 19, he has not received a corrected version of the APA, and the APA includes numerous references in implying that assets of the Debtors' non-debtor subsidiaries are being transferred. RBS and ABN AMRO, which entered into derivatives transactions with several of the Debtors' subsidiaries, said that the any sale order should clarify that LBHI is not transferring assets of non- debtors free and clear of rights and claims of RBS and its affiliates. The Toronto-Dominion Bank, a party to over-the- counter derivative transactions with LBI and its units joins in the concerns raised by RBS. Elliott Associates, L.P., Elliott International, L.P., and The Liverpool Limited Partnership, are creditors of Lehman Brothers Special Financing Inc., Lehman Brothers Commodity Services Inc., and Lehman Brothers International (Europe), all non-debtors before the U.S. Bankruptcy Court. The Elliot Entities asked the Court to: -- specifically reserve jurisdiction to decide any dispute regarding the proper allocation of the proceeds of the Barclays Sale, and require that the Debtors provide prior notice to all parties in interest of any proposed allocation; and -- defer any determinations concerning transfers that may be made by non-debtor subsidiaries until the contours of the Barclays Sale have been determined by the parties and revealed to the Court and parties-in-interest. Matthew J. Gold, Esq., at Kleinberg, Kaplan, Wolf & Cohen, P.C., in New York, says the Debtors' motion papers with respect to the Barclays Sale are "extremely vague with regard to many of the critical terms of the proposed sale -- like which assets are being sold and by whom." According to Mr. Gold, this vagueness is partly a function of the Debtors' failure to file or post on-line any of the schedules to the Asset Purchase Agreement, and partially a function of the broad definitions used. Mr. Gold adds that the Asset Purchase Agreement is also vague in terms of who gets the proceeds of sale. Mr. Gold says, without Court oversight, it is improper to delegate the allocation of the proceeds to Barclays or the Debtors. Mr. Gold also notes that the proposed order submitted by the Debtors would have the Court find that the consideration paid constitutes reasonably equivalent value or fair value. "The Court lacks jurisdiction to make any determination regarding conveyances made by non-debtors to non-debtors." Diversified Credit Investments LLC, as agent for The Government of Singapore Investment Corporation PTE, Ltd., told the Court that GIC and non-debtor subsidiary Lehman Brothers Special Financing, Inc., are parties to a 1992 ISDA Master Agreement, wherein GIC pledged certain collateral. Lehman Brothers' bankruptcy filing constituted an event of default and thus GIC demanded the immediate delivery of the Collateral. Howard D. Ressler, Esq., at Diamond McCarthy LLP, in New York, relates that upon reviewing the Sale Motion, GIC cannot determine with any degree of certainty whether its Collateral is included or excluded from the proposed sale. Mr. Ressler said GIC's counsel has contacted the Debtors' counsel and has asked for assurances that the Collateral is not part of the sale. However, Mr. Ressler says, the Debtors' counsel responded in silence. The Ad Hoc Committee of bondholders of the Main Street Natural Gas, Inc., Gas Project Revenue Bonds, Series 2008A consists of these bondholders who collectively hold in excess of 33% of the outstanding principal amount of the Bonds: -- Capital Research and Management Company, -- Franklin Federal Intermediate-Term Tax-Free Income Fund, -- Franklin Federal Tax-Free Income Fund, -- Franklin Georgia Tax-Free Income Fund, -- Franklin High Yield Tax-Fee Income Fund, -- Fundamental Advisors, LP, -- Oppenheimer Funds, Inc., -- Independence Holding Co., -- The Vanguard Group, Inc., and -- Allstate Insurance Company. Representing the Main Street Bondholders, Kevin M. Lippman, Esq., at Munsch Hardt Kopf & Harr, P.C., in Dallas, Texas, said the Sale Motion fails to adequately identify whether the assets of non-debtor subsidiary Lehman Brothers Commodity Services, Inc., are included or implicated in the assets being sold to Barclays Capital. "A clear understanding of what assets are included is imperative so that the Ad Hoc Committee can evaluate the impact the sale may have on Lehman Commodity's ability to satisfy its obligations under the Purchase Agreement," Mr. Lippman said. Bay Harbour Management L.C., Bay Harbour Master Ltd., Trophy Hunter Investments, Ltd., BHCO Master, Ltd., MSS Distressed & Opportunities 2 and Institutional Benchmarks have prime brokerage accounts with Lehman Brothers International (Europe) and Lehman Brothers, Inc., as agent. David S. Rosner, Esq., at Kasowitz, Benson, Torres & Friedman LLP, in New York, told the Court that cash and securities that are owned by Bay Harbour appears to have been siphoned from London to the United States as part of an $8 billion asset transfer and then "trapped" by the Debtors' midnight bankruptcy filing. It is undisputed that Bay Harbour did not get any money out of this transfer, Mr. Rosner notes. And it is clear, Mr. Rosner says, that Barclays will be receiving a substantial portion of cash and securities held by the Debtors and Lehman Brothers Inc. "It is possible that some or all of this cash and securities may derive from the Defalcated Assets or that the transfer of the Defalcated Funds may have been manipulated to prop up [Lehman Brothers Inc.] for sale, or otherwise used for the Debtors' and its affiliates' operations." According to Mr. Rosner, the Barclays Sale threatens to further dissipate the ability of Lehman Brothers International (Europe)'s Administrator and customers to recover their rightful property and to protect Barclays from claims to this cash, without an opportunity for discovery on very short notice. "Approving the Barclays Sale would set a very dangerous precedent that the exigency of a sale allows a debtor to eviscerate creditors rights in ways expressly prohibited by the Bankruptcy Code and applicable law," Mr. Rosner stated. Bay Harbour asserts that the Debtors should not be allowed to sell assets they do not own. Since the Court has no record at this time to determine that the Debtors own the Purchased Assets, the Court has no substantive ability to adjudicate that the Debtors own the Purchased Assets and that Barclays obtain good title to those assets under the sale. Should the Court approve the Sale, Bay Harbour contends that the Sale Order must make clear that: (i) Barclays will not be acquiring title to assets or their proceeds that the Sellers do not own and these assets or their value may be recovered; (ii) parties with claims to ownership or constructive trust to assets subject to the Sale will have the right to assert their ownership claims against Barclays; and (iii) cash and securities totaling at least $8 billion of securities to be transferred to or from Barclays should be frozen pending a final determination with respect to the rights to those cash and securities in plenary litigation. All cash to be transferred pursuant to the Purchase Agreement should be placed into segregated accounts pending the outcome of litigation, Mr. Rosner adds. Bay Harbour also asserts that Barclays may not be a good faith purchaser because it was involved with the Lehman entities before it "walked away" and it may have known of the asset stripping. Thus, Mr. Rosner says, the Court should not adopt any finding that insulates Barclays from successor liability from customer ownership and constructive trust claims to any customer property. Bay Harbour further asks the Court to compel the Debtors to clarify, among other things: -- what assets are being sold; -- what value the Debtors are providing; -- what are the intercompany claims and what, if any, are being released; and -- the uses of the Defalcated Funds. Overstock.com Inc., Novastar Financial Inc., and their shareholders said the Debtors proposed for the sale of assets and the assumption of liabilities of Lehman Brothers Inc., ignoring the fact that LBI is not a debtor whose assets and liabilities are not subject to the protections of the Bankruptcy Code. Overstock, et al., further said that the proposed sale also blurs the corporate structures and commingle the Debtors and LBI, their assets and liabilities so to effectuate the transfer of assets under Section 363 of the Bankruptcy Code. They stressed that the Debtors proposed to sell non-estate assets while requesting bankruptcy estate asset protections. The Chicago Mercantile Exchange demanded LBI to give confirmation that the proposed sale is consistent with CME's rules concerning identifiable customer securities, property, or commodity contracts of LBI to Barclays before the purchase agreement is executed. Lehman UK Creditors, Administrators Want Claims Preserved Amber Capital,investment manager to Amber Master Fund (Cayman) SPC, complained that the sale fails to protect the interests of the creditors of Lehman Brothers International (Europe), the Lehman UK subsidiary, from which, according to reports LBHI swept $8-billion cash as part of a weekly intercompany transaction, three days before LBHI filed for Chapter 11 protection. The procedures of that intercompany transaction, provides that the cash swept must be reversed. The $8-billion, however, was not reversed, nor did LBHI provide LBIE any assets in return for the Cash. David M. LeMay, Esq., at Chadbourne & Parker LLP, in New York, said that certain assets that may be included in the sale may have been misappropriated from LBIE. Amber said that the sale proceeds must be frozen until those issues are resolved. GLG Partners LP, a creditor and account holder at Lehman Brothers International (Europe), said the proposed order approving the sale does not protect the interests of creditors of LBIE, which is in administration. It said that certain assets that may be included as part of the sale to Barclays Capital Inc., may have been misappropriated from LBIE by the Debtors in advance of their bankruptcy filing. The joint administrators of the Lehman European Group before certain insolvency proceedings the United Kingdom, say they do not object to the proposed sale to Barclays. Martin Flics, Esq., at Linklaters, LLP, in New York, said that due to the close connection among the businesses of the Debtors, LBI and Lehman Europe, the Administrators want clarification that their claims, if any, in connection with certain transfers of securities, will be preserved. According to the Administrators, comprising three partners of PricewaterhouseCoopers LLP, their initial investigation has revealed significant transfers of securities from Lehman European Group to and/or through LBI or the Debtors have taken place, but that the reimbursement in respect of those securities and ad any margin posted in connection with them was not made. Transaction Approved Judge Peck finds that good and sufficient reasons for approval of the Purchase Agreement and the Sale have been articulated by the Debtors, the Creditors' Committee and government officials, and the transaction is in the best interests of the Debtors, their estates, their creditors and other parties in interest. Judge Peck finds that the Debtors have demonstrated good, sufficient and sound business purposes and justifications and compelling circumstances for the Sale under Sec. 363(b) of the Bankruptcy Code before, and outside of, a plan of reorganization. The immediate consummation of the Sale with Barclays is necessary, Judge Peck says, and appropriate to maximize the value of the Debtors' estates, particularly given the wasting nature of the Purchased Assets. Judge Peck is convinced that Barclays' offer is the highest and best and will provide a greater recovery for the Debtors' estates than would be provided by any other available alternative. The Debtors' determination that the Purchase Agreement constitutes the highest and best offer for the Purchased Assets, Judge Peck finds, constitutes a valid and sound exercise of the Debtors' business judgment Judge Peck directs that any and all valid and perfected Interests in Purchased Assets will attach to the Sale Proceeds in the order of priority, and with the same validity, force and effect which they now have against the Purchased Assets. If further hears are necessary to sort out disputes about the Sale Proceeds, the Court will hold them. ----------------------------------------------------------------- [00090] SIPC COMMENCES LIQUIDATION PROCCEDINGS AGAINST LBI ----------------------------------------------------------------- See prior related entry at [00057] (Debtors' Motion to Sell LBI to Barclays for $1.7 Billion). The Securities Investor Protection Corporation commenced a liquidation proceeding under the Securities Investor Protection Act of 1970, as amended, 15 U.S.C. Section 78aaa, et seq., against Lehman Brothers, Inc., before the U.S. District Court for the Southern District of New York (Case No. 08-8119). The proceedings have been removed to the Bankruptcy Court, in two adversary proceedings, Nos. 08-01419 and 08-01420. Barclays Capital, Inc.'s $1.7-billion asset purchase agreement with Lehman Brothers Holdings, Inc., in connection with the sale of LBI to Barclays contemplates the initiation of this SIPA proceeding and the SIPA Trustee's consent to the sale and Judge Peck's further approval of the transaction in the SIPA Proceeding. LBI is a broker-dealer registered with the U.S. Securities and Exchange Commission and the Commodity Futures Trading Commission, a member of the Financial Industry Regulatory Authority, and a member of SIPC. Under SIPA Section 78eee(a)(3), SIPC has jurisdiction over broker-dealers that are members of SIPC. In its complaint, the SIPC said that customers of LBI are in need of the protections afforded under the SIPA, citing that LBI has failed to meet its obligations to its customers. One of those obligations, LBI's inability to meet its obligations to customers as they mature, Kenneth J. Caputo, senior associate general counsel of SIPC, said. The SIPC has designated: James W. Giddens, Esq. Hughes Hubbard & Reed LLP One Battery Park Plaza New York, NY 10004-1482 Telephone (212) 837-6060 Fax (212) 422-4726 as trustee, and Mr. Giddens' law firm as his counsel, for the SIPA liquidation of LBI. The filing of the Complaint and Application operate, pursuant to 11 U.S.C. Section 362(a), as an automatic stay. SIPA Section 78eee(b)(2)(B)(i) provides that the Court "shall stay any pending bankruptcy, mortgage foreclosure, equity receivership, or other proceeding to reorganize, conserve, or liquidate the debtor or its property and any other suit against any receiver, conservator, or trustee of the debtor or its property. . ." The SIPC has requested the Court to enter an order staying all persons and entities for a period of 21 days after the date of from enforcing liens or pledges against the property of LBI and from exercising any right of set-off, without first receiving the written consent of SIPC. Mr. Giddens, as trustee for the SIPA liquidation of LBI, has asked the Bankruptcy Court to approve the sale of LBI to Barclays. SIPC's Statement WASHINGTON, District of Columbia -- September 18, 2008 -- The Securities Investor Protection Corporation (SIPC), which maintains a special reserve fund authorized by Congress to help investors at failed brokerage firms, issued the following statement today in relation to the SIPC member, Lehman Brothers Inc. (LBI). SIPC President Stephen Harbeck said: "On Friday, September 19, 2008, SIPC will file a proceeding placing LBI in liquidation under the Securities Investor Protection Act (SIPA). After extensive discussions and consultation with representatives of the firm and its parent company, as well as representatives of the Securities and Exchange Commission, the Federal Reserve, the Commodity Futures Trading Commission, the Financial Industry Regulatory Authority and others, SIPC has decided that such action is appropriate for the protection of customers and to facilitate the transfer of customer accounts of LBI and an orderly unwinding of the business of the brokerage firm. "This action is being taken in connection with a proposed sale of the business of the broker-dealer to Barclays Capital Inc. A hearing on approval of that sale is scheduled for September 19, 2008, at 4 p.m., in the Chapter 11 proceeding of the parent company, LBHI. "To provide clarity to market participants, I would note the following: * SIPC's initiation of the proceeding is designed to minimize market disruption and to allow the transfer of assets and customer accounts of LBI to close in a timely manner under the negotiated Asset Purchase Agreement. * SIPC will ask the court where the SIPA proceeding is filed to allow the Trustee to operate the business of the firm for a limited time so that normal operations can continue. * SIPC continues to consult and coordinate with the above- mentioned federal agencies and others to ensure orderly market functioning. "SIPC remains vigilant and committed to our core mission of customer protection." About SIPC The Securities Investor Protection Corporation is the U.S. investor's first line of defense in the event a brokerage firm fails, owing customer cash and securities that are missing from customer accounts. SIPC either acts as trustee or works with an independent court-appointed trustee in a brokerage insolvency case to recover funds. The statute that created SIPC provides that customers of a failed brokerage firm receive all non- negotiable securities -- such as stocks or bonds -- that are already registered in their names or in the process of being registered. At the same time, funds from the SIPC reserve are available to satisfy the remaining claims of each customer up to a maximum of $500,000. This figure includes a maximum of $100,000 on claims for cash. From the time Congress created it in 1970 through December 2006, SIPC has advanced $505 million in order to make possible the recovery of $15.7 billion in assets for an estimated 626,000 investors. ----------------------------------------------------------------- [00091] CONTRACTS ASSIGNED TO BARCLAYS AS PART OF LBI SALE ----------------------------------------------------------------- See prior related entry at [00057] (Debtors' Motion to Sell LBI to Barclays for $1.7 Billion). The Debtors have posted lists of the contracts that they are assigning to Barclays Capital, Inc., in connection with the proposed $1.7-billion sale of their core assets in the United States. The Debtors also estimated the amounts counterparties will receive in order to cure defaults under those contracts. A list of the IT Leases the Debtors will assume and assign is available at: http://bankrupt.com/misc/LehmanBarclaysITContracts.pdf A list of Non-IT Leases the Debtors will assume and assign is available at: http://bankrupt.com/misc/LehmanBarclaysNon-ITContracts.pdf A list of Real Estate Leases the Debtors will assume and assign is available at: http://bankrupt.com/misc/LehmanBarclaysRealEstateContracts.pdf The Debtors said Barclays Capital may designate (or undesignated) additional contracts for assumption and assignment within 60 days after the sale closing. Objections Non-debtor parties to the contract that object to the proposed assumption and assignment of their contracts were required to raise objections at the sale hearing or file the objection with the Court before the hearing. A number of contract counterparties filed objections to the assumption of their contracts or the amounts estimated by the Debtors that would cure defaults under those contracts. Fannie Mae Housing Institute, said that is owed substantial sums by Lehman pursuant to certain mortgage selling and servicing contracts, and objected to the proposed $0 cure by the Debtors. Bloomberg L.P. and Bloomberg Finance L.P., disputed that proposed zero cure amount for the assumption of their contracts, and noted that the Debtors have been using Bloomberg products, which are critical for the preservation of Lehman's capital markets and investment banking operations. Microsoft Corporation and Microsoft Licensing GP, said it would take time to determine the contracts the Debtors are assigning to Barclays since the contracts were not listed with specificity. They further said the contracts appear to include licenses of Microsoft software and products, which are licenses of copyrighted materials, that cannot be assumed without their consent. United Parcel Service, Inc., filed what it calls a protective objection, to preserve its right to investigate if it has any existing contracts with the Debtors and Lehman Brothers Inc., and find out if the contracts the Debtors proposed to assume and assign are not contracts of a debtor. Main Street Natural Gas, Inc., expressed concern that its purchase agreement with Lehman Brothers Commodities Services, Inc., is among those contracts that would be assumed and assigned to Barclays. The company signed an agreement with LBCSI for a 30-year supply of natural gas, whose obligation under the contract is guaranteed by Lehman Brothers Holdings. Advanced payment for the product is taken from the proceeds of the bonds issued pursuant to a trustee indenture between Main Street and The Bank of New York Trust Company N.A. Main Street said the Debtors did not "adequately identify" if the assets of LBCSI, are among those to be sold. It pointed out that the assets, as defined in the asset purchase agreement, may also include all contracts that would be assumed and assigned to Barclays. ----------------------------------------------------------------- [00092] DEBTORS' MOTION FOR RULING ON CITIBANK'S $28B ADVANCES ----------------------------------------------------------------- Lehman Brothers Holdings Inc., sought a ruling from the U.S. Bankruptcy Court for the Southern District of New York regarding the status and treatment of advances made by Citibank N.A. to Lehman Brothers Holdings and certain of its affiliates. Citigroup Inc., and its affiliates including Citibank are party to various clearing and custodial agreements with Lehman Brothers Holdings and its affiliates. Richard Krasnow, Esq., at Weil, Gotshal & Manges LLP, in New York, said that pursuant to each of the Clearance Agreements, Citigroup and its affiliates may, in their sole discretion, make advances to or for the benefit of the respective Lehman Clearance Parties, which are payable by the respective Lehman Clearance Parties upon demand by Citibank. Mr. Krasnow further said that the obligations of the Lehman Clearance Parties under the Clearance Agreements generally are guaranteed by Lehman Brothers Holdings pursuant to the guarantee agreement dated January 7, 2004, in favor of Citigroup and its affiliates. $28 Billion in Advances Mr. Krasnow said that prior to Sept. 15, Citibank provided intra- day advances of up to $19 billion to Lehman Brothers Holdings. Since the bankruptcy filing, Citibank has also made advances of about $9 billion daily to or for the benefit of the Lehman Clearance Parties at the request of Lehman Brothers Holdings and the Federal Reserve Bank of New York. "The recent advances were necessary to clear and facilitate the settlement of securities and foreign exchange transactions with customers or clients of the Lehman Clearance Parties to avoid a disruption of the financial markets," Mr. Krasnow said. He added that Citibank may elect to make additional advances under the Clearance Agreements in its sole discretion. Pursuant to the June 7, 2004 Guaranty Agreement, all postpetition advances are guaranteed by Lehman Brothers Holdings. Pursuant to Section 105(a) of the Bankruptcy Code, the Debtors asked the Court that any of Citibank's claims against Lehman Brothers Holdings arising under or pursuant to the Clearance Agreements or the Guaranty Agreement, and arising from any postpetition advances should be allowed as claims under the Guaranty Agreement. They also asked the Court to allow Citibank to set off such claims against the cash deposit account held at Citibank to the same extent as if they had been made prior to the bankruptcy filing. Lehman Brothers Holdings maintains the cash deposit account at Citibank with a current balance of about $1.763 billion to secure the financial exposure of Citigroup and its affiliates to the company. Mr. Krasnow said that Citibank has the right to set off against the account prepetition obligations of Lehman Brothers Holdings owed to Citibank. To the extent the Court views the postpetition advances as the postpetition incurrence of debt, Lehman Brothers Holdings requested the Court to confirm that the postpetition advances are authorized under Section 364 of the Bankruptcy Code as to the Guaranty Agreement. Lehman Brothers Holdings clarified that is not asking the Court to validate the Guaranty Agreement, to validate Citibank's right of set-off under the agreement or to grant administrative expense status for its claims. Citigroup: Advances for Clearing of Securities Transactions with Lehman's Clients Citigroup and its affiliates delivered a statement to the Court supporting Lehman Brothers Holdings' motion for confirmation of the status of the clearing advances. John Rapisardi, Esq., at Cadwalader, Wickersham & Taft LLP, in New York, confirmed that Citibank has made advances of about $9 billion daily for the benefit of Lehman Clearance Parties to clear and facilitate the settlement of securities and foreign exchange transactions with customers or clients of the Lehman Clearance Parties. Mr. Rapisardi said that Lehman Brothers Holdings is not seeking a validation of Citigroup's guarantee from the company nor does it seek a determination that Citigroup is entitled to administrative expense status. He pointed out that the Court is being asked to confirm that the claims arising from postpetition advances or other transactions after the bankruptcy filing will be allowed as claims under the Guaranty Agreement, and that Citibank may set off the claims against the account to the same extent as if the postpetition advances had been made before the bankruptcy filing. Mr. Rapisardi warned that if the Court does not grant Lehman Brothers Holdings' proposal, Citigroup "would be unable" to continue making future advances. ----------------------------------------------------------------- [00093] DEBTORS' MOTION TO BORROW $450 MILLION FROM BARCLAYS BANK ----------------------------------------------------------------- See prior entry at [00056]. The Debtors obtained a preliminary court approval to borrow up to $200,000,000 from Barclays Bank plc. Barclays serves as administrative agent for the lenders under the $450,000,000 debtor-in-possession credit agreement. In its order dated Sept. 17, the U.S. Bankruptcy Court for the Southern District of New York allowed the Debtors to avail of the $200,000,000, provided that it will be taken from the term loan. The Court is convinced that the Debtors have an immediate and critical need to obtain fund to continue their business operations, and sees that the Debtors are unable to obtain the required funds elsewhere or on terms more favorable than those offered by Barclays. The Court, however, did not give the Debtors permission to use the loans or advances made under the DIP financing documents after the bankruptcy filing, and all proceeds of the collateral to pay their expenses except those allowed under the financing documents and those incurred by attorneys and other professionals retained by the Debtors and the Official Committee of Unsecured Creditors. Subject only to the carve-out, all amounts that have been borrowed from Barclays will constitute "allowed superpriority administrative expense claims against the Debtors having priority over all administrative expenses." Barclays is also granted "first priority and perfected liens" in all equity interests of Neuberger Berman Holdings LLC directly owned or held by the Debtors, and in any promissory note or other debt instrument that would be issued to the Debtors by Neuberger to fund intercompany loans. ----------------------------------------------------------------- [00094] COMMITTEE SELECTS FTI AND HOULIHAN AS FINANCIAL ADVISORS ----------------------------------------------------------------- The Official Committee of Unsecured Creditors of the Debtors has selected FTI Consulting Inc., and Houlihan Lokey as its financial advisors. Michelle O'Brien spokeswoman for Houlihan and Andy Maas, spokesman for FTI confirmed that the Creditors Committee retained the firms, subject to approval by the Bankruptcy Court. FTI is a global business advisory firm while Houlihan is an international investment bank that provides financial advisory services. In 2007, Houlihan was ranked the number one M&A advisor for U.S. transactions under $1.25 billion and M&A fairness opinion advisor by Thomson Financial. Houlihan was also ranked the number one restructuring investment banking firm by TheDeal.com's Bankruptcy Insider. ----------------------------------------------------------------- [00095] BARCLAYS MAY ACQUIRE LEHMAN ASSETS IN EUROPE AND ASIA ----------------------------------------------------------------- Barclays Plc, which has inked a $1.7-billion deal to acquire Lehman Brothers Holdings Inc.'s key operations in North America and New York, is contemplating acquiring more of Lehman's assets and employees in Europe and Asia, Bloomberg News reports. "We wouldn't want to miss the opportunity to add some of the talent from the U.K. and Europe to the team," Barclays president Robert D. Diamond Jr. told MoneyNews. "It would most typically be where Lehman has a strong position and BarCap (Barclays Capital) a weak position." Barclays is also reportedly interested in acquiring Lehman's Japanese investment banking and stock brokerage divisions for an undisclosed amount, Bloomberg states. Barclays said in a press statement that certain of its shareholders have expressed interest in increasing their shareholdings by $1 billion to support the acquisitions and beef up Barclays' capital base, MoneyNews discloses. ----------------------------------------------------------------- [00096] LEHMAN MULLS SALE OF INVESTMENT MGT. UNIT TO BAIN/HELLMAN ----------------------------------------------------------------- See prior entry at [00037]. Joint Deal to Come Up Soon Lehman Brothers Holdings, Inc., is in discussions regarding a sale of its investment-management unit, which includes Neuberger Berman, to private-equity firms Bain Capital LLC and Hellman & Friedman LLC, which could fetch around $5 billion, Bloomberg News reports. "The impact of the joint bid for Lehman's asset management business will be unclear until the terms" of the auction process are disclosed, Bloomberg News quoted David Pauker, of managing director of Goldin Associates, a restructuring firm. Charlie Gasparino, on-Air Editor at CNBC.com, reports that a joint deal to acquire the investment management unit makes sense to firms, who would have to commit $1.75 to $2.5 billion to buy the business. Reports say that Neuberger Berman have been taking bids from five private equity firms reported as possible buyers Kohlberg Kravis Roberts, Hellman & Friedman, Clayton Dubilier & Rice, Bain Capital, and CVC Capital Partners. Neuberger Berman is one of Lehman's few profit-making divisions. Precious Artwork Collection Neuberger Berman was founded in 1939 to show off his art collection. Neuberger has had a fund since 1990 to buy works from emerging to mid-career artists. These artists include Marlene Dumas, Andreas Gursky, Takashi Murakami, Neo Rauch, and Sam Taylor-Wood. According to Bloomberg News, Lehman which owns about 3,500 contemporary artworks that have been displayed in the investment bank's offices around the world, and the fate of the collection is unclear. "It remains to be seen whether the new owner will keep the collection intact or sell the pieces off while the art market is strong," says Artinfo. Bidders Trim Down To Three The race to buy Neuberger has come down to private equity firms Clayton, Dubilier & Rice, Hellman & Friedman and Bain Capital, according to Private Equity News. Henry Ramallo, a managing director and senior portfolio manager of Neuberger, said Carlyle group had dropped out of the race. "I don't think Kohlberg Kravis Roberts has done enough due diligence," Mr. Ramallo added. Mr. Ramallo said he did not know where the private equity firms were going to get their finance but had no doubt they would. Private Equity News reported that Mr. Ramallo disclosed to that Neuberger has $130,000,000 dollars of assets under management. The bulk of this, $70,000,000,000, is in fixed income securities and $60,000,000,000 is in equities. Mr. Ramallo adds that only $9,000,000,000 of this has come through Lehman Brothers. KKR Likely to Get Nuberger Berman Kohlberg Kravis Roberts is the likely acquirer of the asset management businesses of Lehman, AsianInvestor reported. According to the report, KKR has recently announced its intent to diversify its Lehman business to public equities, infrastructure, real estate and mezzanine debt -- all areas covered by Lehman Brothers Asset Management and U.S. affiliate Neuberger Berman. According to AsianInvestor, one of the key details in the discussion is how to treat an approximately $400,000,000 of funding obligations across LBAM portfolios to the parent, LBH, which is its biggest single investor. AsianInvestor said it is not clear whether a buyer like KKR would be willing to fund these, now that LBH has been declared bankrupt. ----------------------------------------------------------------- [00097] SUMITOMO MITSUI DENIES SALE TALKS WITH LEHMAN ----------------------------------------------------------------- Dow Jones Newswires says that Sumitomo Mitsui Financial Group Inc. has denied reports that it is buying some of Lehman Brothers' assets and operations in Japan. "It's not true that Sumitomo Mitsui Financial Group is bidding for Lehman's Japan assets as a sponsor," an SMFG spokeswoman said, according to Dow Jones. Bloomberg News, citing three people familiar with the matter, reported earlier that Lehman Brothers Holdings Inc. is in talks to sell some Japan assets to Sumitomo Mitsui in a bid to save its 1,300-employee operation in the country. Sumitomo Mitsui, according to Bloomberg, may also seek to buy businesses from Lehman elsewhere in Asia, the people familiar with the Japan talks said. Bloomberg added that Lehman Brothers Japan Inc. is also trying to sell assets including its equity, investment banking and real- estate businesses to Mitsubishi UFJ Financial Group Inc. and Barclays Plc. Lehman's Japan units will hold a meeting with creditors to discuss a revitalization plan at 1 p.m. in Tokyo on Sept. 19. Lehman Japan reported profits of JPY12.4 billion for its fiscal year ended March 31, 2007, up from JPY1.4 billion a year earlier. Its revenues rose to JPY122 billion from JPY35.6 billion. ----------------------------------------------------------------- [00098] LEHMAN TO SELL $8-MIL. STAKE IN GUYANA HOTEL ----------------------------------------------------------------- Lehman Brothers Holdings Inc. is reportedly selling its US$8 million share in Le Meridien Pegasus hotel in Guyana to a Guyanese businessman by year-end, Kevin Lindon writes for the Caribbean Net News in Guyana. The undisclosed buyer is living in the United States, according to the Caribbean Net News. News of the sale follows Lehman Brothers' bankruptcy filing on Sept. 15, 2008, the report says. Caribbean Net News also said that investors are mulling on dropping "Le Meridien" off the hotel's name and retain "Pegasus." Mr. Plas asserted that the Pegasus brand would have more impact on travelers and tourists in Guyana, based on the report. The hotel's manager, Bert Plas, confirmed the report on the name change saying that the matter is under talks, Caribbean Net News relates. Caribbean Net News notes that another large hotel in Guyana, the Buddy's International Hotel was earlier sold to a Turkish hotelier. According to the report, the hotel industry in Guyana is expected to change following completion of the Marriot Hotel in a few years. ----------------------------------------------------------------- [00099] TREASURY & FED PLAN TO BAILOUT BANKS SANS LEHMAN COLLAPSE ----------------------------------------------------------------- Treasury Secretary Henry Paulson, Jr. and Federal Reserve Chairman Ben S. Bernanke have committed to draft a bail out plan aimed at forming an agency to absorb bad debt of banks and brokerages, for congressional approval, Bloomberg News reports. Secretary Paulson disclosed on September 18, 2008, a Resolution Trust Corporation-type solution of buying huge amounts of distressed mortgages held by ailing financial institutions to help ease the current financial crisis, The New York Times says. If approved, the plan will prove to be the biggest bailout in the history of America and the most direct commitment of taxpayer funds in what is the worst yet financial crisis to hit Wall Street, the paper notes. "What we are working on now is an approach to deal with systemic risks and stresses in our capital markets," Mr. Paulson told NY Times. "[It would be a] comprehensive approach that would require legislation to deal with the illiquid assets on financial institutions' balance sheets," he added. Wall Street trading rallied after Mr. Paulson's announcement, the Wall Street Journal states. In the 1980's, over 1,000 savings-and-loan institutions in the U.S. collapsed, guardian.co.uk relates. The '80s crisis is reported to have totaled around $150 billion. The Resolution Trust Corporation bought -- and eventually sold in the 1990s -- hundreds of billions of dollars' worth of real estate, from these failed savings-and-loan companies, guardian.co.uk notes. By 1995, when the crisis had abated, the RTC was folded into the Federal Deposit Insurance Corporation, NY Times says. In this case, however, the Paulson RTC-type plan will take over only distressed assets, not entire corporations, NY Times notes. The details of the plan are yet to be finalized, WSJ says. Senior aides and lawmakers said that the aim is to complete legislation before Congress adjourns on September 26, people familiar with the matter disclose. Mr. Paulson's announcement of the RTC-type plan came at the heels of a $180 billion-in-loans offer made by the Federal Reserve and other major central banks to financial markets, and an additional $100 billion to keep the benchmark federal funds rate at a target of 2%, NY Times states. Despite all these, banks all over the globe remain afraid to lend to each other, much less to their clients, NY Times maintains. A big question is how the government will value the assets it takes onto its books, WSJ points out. A possible answer could be some sort of auction facility, so that the government would not have to be involved in negotiating asset values with companies, WSJ states. Nevertheless, financial companies are expected to take big losses, WSJ opines. President Bush and his top advisers have firmly opposed bailouts, WSJ asserts, but the mortgage crisis has already obligated the Treasury and the Fed to bail out four of the country's most prominent financial institutions -- Bear Stearns in March; Fannie Mae and Freddie Mac earlier this month; and American International Group, the insurance conglomerate, just this week, NY Times states. The financial turmoil swept Lehman Brothers into Chapter 11 protection on September 15. In contrast with most reports, WSJ imparts that the new plan would more likely mirror the Reconstruction Finance Corporation, a Depression-era relief program formed in 1932 by President Hoover, which tried to inject liquidity into the market by giving loans to banks and other businesses. According to The New York Sun, Nancy Pelosi, the House Speaker, said in a letter to President Bush, "We stand ready beyond the targeted adjournment date of September 26 to permit Congress to consider legislative proposals and conduct necessary investigations." "[T]he worsening crisis in our financial markets demands strong solutions and decisive leadership." The New York Sun relates that Rep. Barney Frank, chairman of the House Financial Services Committee, is of a different view. "It will be the power - it may not be a new entity - it will be the power to buy up illiquid assets," Mr. Frank told The New York Sun. Citigroup Inc., JPMorgan Chase Co., Bank of America Corp., Goldman Sachs Group Inc., Merrill Lynch & Co. and Lehman Brothers Holdings Inc. alone had over $500 billion as of June 30 of "Level 3 assets" -- ones whose values can only be determined through internal models because of illiquid markets, according to data in a Sept. 15 report from New York- based bond research firm CreditSights Inc., Bloomberg notes. Stock analyst Roger Ehrenberg ventured to say that the RTC-style bail out could cost trillions of dollars. Kenneth Rogoff, former head of the International Monetary Fund, told the Financial Times that regardless of the Fed and Treasury's most determined efforts, the political pressures for up to $2 trillion bailout are "going to be irresistible." ----------------------------------------------------------------- [00100] SEC CURBS SHORT SELLING AFTER LEHMAN COLLAPSE ----------------------------------------------------------------- The U.S. Securities and Exchange Commission is implementing measures to address illegal naked short selling and other market manipulation tactics following the collapse of Lehman Brothers, Inc. SEC Chairman Christopher Cox said that the recent turmoil in the financial markets has challenged the average American's idea of markets as orderly, liquid, efficient and rational. Markets are the best tool a free society has to price and allocate assets across a complex economy whose wisdom of crowd is supplanted by crowd behavior. He said that markets should be kept well- functioning in order to preserve the investors' confidence. New Short Selling Rules In an ordinary short sale, the short seller borrows a stock and sells it, with the understanding that the loan must be repaid by buying the stock in the market. In an abusive naked short transaction, however, the seller does not actually borrow the stock, and fails to deliver it to the buyer. Naked shorting can allow manipulators to force prices down far lower than would be possible in legitimate short selling conditions. SEC's actions, which are the result of rulemaking under the Administrative Procedure Act, go beyond its previously issued emergency order, which was limited to the securities of financial firms with access to the Federal Reserve's Primary Dealer Credit Facility. The Commission adopted, on an interim final basis, a new rule requiring short sellers and their broker dealers to deliver securities by the close of business, three days after the sale transaction date. The Commission will impose penalties for violations. If a short sale violates this close-out requirement, any broker- dealer acting on the short seller's behalf will be prohibited from further short sales in the same security unless the shares are not only located but also pre-borrowed. The prohibition on the broker-dealer's activity applies not only to short sales for the particular naked short seller, but also to short sales for any customer. Although the Close-out Requirement takes effect on September 18, 2008, the Commission is seeking comment during a period of 30 days on all aspects of the rule and will follow further rule making procedures at the end of the comment period. SEC approved a final rule to eliminate the options market maker exception from the close-out requirement of Rule 203(b)(3) in Regulation SHO. This rule change becomes effective on September 18, 2008. Thus, options market makers will be treated in the same way as all other market participants and required to abide by the hard T+3 close-out requirements that effectively ban naked short-selling. Moreover, SEC adopted Rule 10b-21 which targets fraudulent short selling transactions. The new rule covers short sellers who deceive broker-dealer or any other market participants. The new rule makes clear that those who lie about their intention or ability to securities in time for settlement are violating the law when they fail to deliver. This will take effect on September 18, 2008. According to Mr. Cox, the new measures will constitute weapons in the SEC arsenal in its continuing battle against abusive naked short-selling and unlawful market manipulation. Moreover, Mr. Cox said that he is asking SEC to consider, on an interim basis, a disclosure rule that will require hedge funds and other large investor to disclose their short positions. Prepared by the staffs of the Division of Investment Management and the Division of Corporation Finance, the new rule will be designed to ensure transparency in short selling. Managers with more than $100 million invested in securities would be required to promptly begin public reporting of their daily short positions. The managers currently report their long positions to the SEC. Moreover, the Division of Enforcement will obtain disclosure from significant hedge funds and other institutional traders of their past trading positions in specific securities. Following SEC's actions, United Kingdom's Financial Services Authority expressed intent to ban short selling of financial stocks until January 2009, according to the Wall Street Journal. UK Treasury Chief Alistair Darling, was quoted in the report to have welcomed the FSA decision for the interest of financial stability given the current market conditions. ----------------------------------------------------------------- [00101] GERMAN BANK SENDS $426MM TO LEHMAN ON PETITION DATE ----------------------------------------------------------------- KfW Bankengruppe, a government-owned German lender, "accidentally" gave Lehman Brothers US$426,000,000, The New York Times reports. The transfer was made on Sept. 15, the day Lehman Brothers Holdings, Inc., sought bankruptcy protection in New York. The "automated transfer" to Lehman caused an outcry in Germany which prompted the Bank's administrative board to suspend two of the Bank's managing directors and the head of its risk-control department, the report says. According to The Times' report, KfW's total exposure to Lehman is around EUR500 million. ----------------------------------------------------------------- [00102] FREDDIE MAC HAS $1.2-BIL. UNSECURED CLAIM AGAINST LEHMAN ----------------------------------------------------------------- The Federal Home Loan Mortgage Corporation said Lehman Brothers Holdings, Inc., owes it $1.2 billion, plus accrued interest, pursuant to certain unsecured lending transactions. Freddie Mac disclosed in a filing with the U.S. Securities and Exchange Commission that Lehman was its counterparty in certain unsecured lending transactions due to mature Sept. 15, 2008, in which Lehman was to make principal payments, aggregating $1.2 billion plus accrued interest, to Freddie Mac. Lehman sought Chapter 11 protection on Sept. 15. Lehman services single-family loans for Freddie Mac. The company's potential exposure to Lehman for servicing-related obligations due to Freddie Mac, including repurchase obligations, is currently estimated to be approximately $400 million, the company's chief executive officer, David M. Moffet, relates. The company stated it does not know whether and to what extent it will sustain a loss relating to those transactions. "Actual losses could materially exceed current estimates," Mr. Moffet noted. Freddie Mac said it is in the process of evaluating its exposures to Lehman and its affiliates arising under other business relationships. "Until this evaluation is complete, the company cannot provide assurances as to the potential materiality of such exposures," Mr. Moffet added. The automatic stay under the Bankruptcy Code prohibits creditors from seeking immediate payment of debt from debtors, and requires them to line up for recovery pursuant to a plan of reorganization or liquidation that the Court will confirm. Under the absolute priority rule of the Bankruptcy Code, administrative claims, and secured claims, to the extent of the value of their collateral, will have priority over unsecured claims. Unsecured claims, however, will be paid first before any payments could be made on account of stock ownerships. "It's obvious Freddie didn't exercise reasonable safeguards while using taxpayers' money," said Sean Egan, managing director at Egan-Jones Ratings Co., an independent credit-rating firm, according to Dow Jones Newswires. "Lending such a large amount, there should have been collateral in place," said Mr. Egan. "It's unfortunate that taxpayers will have to bear a loss of this magnitude." Freddie Mac is a stockholder-owned corporation established to support homeownership and rental housing. To recall, Freddie Mac staved off collapse after the U.S. Treasury and the Federal Reserve led actions that placed Freddie Mac and affiliate Fannie Mae through a conservatorship under the Federal Housing Finance Agency. ---------------------------------------------------------------- [00103] JAPAN'S SUMITOMO MITSUI HAS $980-MIL. EXPOSURE TO LEHMAN ----------------------------------------------------------------- Sumitomo Mitsui Financial Group, Inc., said in a Sept. 16 statement that its subsidiaries, including Sumitomo Mitsui Banking Corporation and SMBC subsidiaries have claims pertaining to Lehman Brothers Holdings Inc. and its affiliates: -- Credit exposures such as loans of about US$980 million, of which US$880 million is secured. -- Samurai bonds of approximately JPY500,000,000. "The majority of the above amount is secured. We have been examining the situation ad estimate the loss, at this point in time, to be approximately JPY10 billion; a loss provisioning or other necessary steps will be taken this fiscal year." In addition, SMBC participated in loans and commitment lines originated by Lehman Brothers and its affiliates totaling approximately US$3.2 billion, of which approximately $700 million is outstanding, and US$2.5 billion is undrawn. "However, the probability of SMBC incurring losses from these transactions is expected to be very low because the credit risk lies with the underlying obligors who are all investment-grade obligors and not with Lehman Brothers," the statement said. Sumitomo Mitsui noted that a loan participation agreement transfers the economic benefit, such as the receipt of interest and principal, and the risk of a loan, held by the original lender (in this case Lehman Brothers), from such loan's original lender to the participant (in this case SMBC) until the final maturity of such loan, or for a fixed period of time. Sumitomo Mitsui says that it may incur losses of approximately JPY10 billion by making provisions for the uncovered exposure to Lehman Brothers at the end of the first half of its fiscal year. ----------------------------------------------------------------- [00104] WACHOVIA CORP. HAS $494-MIL. EXPOSURE TO LEHMAN ----------------------------------------------------------------- Wachovia Corp., among U.S. banks, has the biggest exposure to Lehman Brothers Holdings Inc. among U.S. banks, reports Elisa Martinuzzi of Bloomberg News, citing analysts at Citigroup Inc. Citigroup estimates Wachovia's exposure at $494,000,000, Bloomberg says. ----------------------------------------------------------------- [00105] BANK OF AMERICA HAS $400-MIL. EXPOSURE TO LEHMAN ----------------------------------------------------------------- Bank of America Corp., among U.S. Banks, has the second biggest exposure to Lehman Brothers Holdings Inc., reports Elisa Martinuzzi of Bloomberg News, citing a group of analysts led by Keith Horowitz. The analysts estimate Bank of America's exposure at $400,000,000, Bloomberg reports. ----------------------------------------------------------------- [00106] HARTFORD FINANCIAL HAS $332-MIL. EXPOSURE TO LEHMAN ----------------------------------------------------------------- HARTFORD, Connecticut -- September 18, 2008 -- In response to recent market events, The Hartford Financial Services Group, Inc. (NYSE: HIG), one of the nation's largest and most diversified financial services companies, today disclosed its investment holdings in Lehman Brothers and American International Group as set forth in the table below. As of June 30, 2008, the company's general account assets were $94.6 billion. "We are seeing unprecedented volatility in the capital markets and these are obviously very trying times," said Ramani Ayer, The Hartford's chairman and chief executive officer. "It has been difficult for our customers, shareholders and employees to watch the events that have unfolded, with so many livelihoods tied to the financial services marketplace." "We recognize the importance of the commitments we have made to our policyholders and are well capitalized to meet those commitments. We remain confident in the diversified operating businesses that form the foundation of our company. Our strong balance sheet, excellent insurance financial strength ratings and low debt-to-capitalization ratio provide us with financial flexibility." "For 198 years, The Hartford has successfully navigated through many different business cycles. The promises we make to our customers and our partners are paramount and we will continue to use our experience and expertise to deliver on our promises," added Ayer." The Hartford's insurance financial strength ratings stand as follows: Moody's (Aa3), A.M. Best (A+) and Standard & Poor's (AA- ). The table below sets forth the company's aggregate debt and equity exposures at GAAP amortized cost to Lehman and AIG, as of September 16, 2008. Lehman AIG(1) ------ ------ Senior Debt $91 million $8 million(2) Subordinated Debt $127 million $7 million(3) Preferred Stock $34 million None Common Stock None None (1) The company also has a $35 million private placement investment in an AIG affiliate in which the company has a priority claim on a diversified pool of assets. (2) The company also owns $97 million of senior debt issued by operating subsidiaries of AIG. (3) The company also owns $35 million of subordinated debt issued by operating subsidiaries of AIG. Derivative Exposures The Company had approximately $50 million of unsecured counterparty exposure to Lehman in connection with derivatives transactions as of September 16, 2008. The Company also is exposed to senior debt issued by Lehman and AIG through credit default swaps. The company's aggregate exposure to Lehman and AIG pursuant to these swaps is approximately $30 million and $70 million, respectively. About The Hartford The Hartford, a Fortune 100 company, is one of the nation's largest and most diversified financial services companies, with 2007 revenues of $25.9 billion. The Hartford is a leading provider of investment products, life insurance and group benefits; automobile and homeowners products; and business property and casualty insurance. International operations are located in Japan, the United Kingdom, Brazil, Canada and Ireland. The Hartford's Internet address is www.thehartford.com. ----------------------------------------------------------------- [00107] ISRAEL'S LEUMI HAS $88-MIL. EXPOSURE, FREZES $105-MIL. ----------------------------------------------------------------- The Tel Aviv District Court in Tel Aviv, Israel, approved a request by the Bank Leumi Le-Israel Ltd., to freeze $105,000,000 of funds held by Lehman Brothers Holdings Inc. in Israel, according to a report by Susan Lerner of Bloomberg News. Bank Leumi is the largest bank in Israel in terms of market value. Bank Leumi asked the Tel Aviv District Court to freeze the $105,000,000 funds after Lehman Brothers allegedly failed to transfer $100,000,000 to Leumi as proceeds from its redemption from the sale of securities issued by Lehman. The Bank Leumi also stated in a press statement that it has an aggregate exposure of $88,000,000 to Lehman Brothers, which consist of bonds, derivatives and credit derivatives. Since Leumi filed its damage suit against Lehman, Leumi's shares have fallen by 26% to 10.67 per share as of September 18, 2008. ----------------------------------------------------------------- [00108] TORCHMARK HAS $82-MIL. EXPOSURE TO LEHMAN ----------------------------------------------------------------- MCKINNEY, Texas -- September 18, 2008 -- Torchmark Corporation (TMK: 59.19, +3.22, +5.8%) disclosed its investments in American International Group, Lehman Brothers, Fannie Mae, Freddie Mac and Washington Mutual that, based on information currently available, may have sustained some amount of other than temporary impairment. These investments, detailed in the schedule below, total $209 million or 2% of total invested assets. In the unlikely event that the Company determines the entire amount of these investments to be other than temporarily impaired, the after-tax impairment cost would be $136 million. The Company will determine the amount of any impairment charge relating to these securities at September 30, 2008. The Company also disclosed that it has no derivatives or any other off-balance sheet arrangements with these or any other entities. Torchmark Corporation Holdings in AIG, Lehman, Washington Mutual, Freddie Mac and Fannie Mae in Millions of Dollars at Amortized Cost as of 8-31-08 Freddie Mac Washington AIG Lehman Fannie Mae Mutual TOTAL --- ------ ----------- ---------- ----- Senior Debt $31 $74 -(a) $0 $105 Subordinated debt 75 8 0 19 102 Preferred Stock 0 0 2 0 2 Common Stock 0 0 0 0 0 ---- --- -- --- ---- Total Holdings at Amortized Cost $106 $82 $2 $19 $209 ---- --- -- --- ---- After Tax Exposure $136 ==== (a) Excludes $168 million of senior debt since these securities are not considered as an impairment risk at this time. Torchmark Corporation is a holding company specializing in life and supplemental health insurance for "middle income" Americans marketed through multiple distribution channels including direct response, and exclusive and independent agencies. Torchmark has several nationally recognized insurance subsidiaries. Globe Life And Accident is a direct-response provider of life insurance known for its administrative efficiencies. American Income Life provides individual life insurance to labor union members. Liberty National Life, one of the oldest traditional life insurers in the Southeast, is the largest life insurer in its home state of Alabama. United American is a consumer-oriented provider of supplemental health insurance. ----------------------------------------------------------------- [00109] CHINA'S BANK OF COMM. HAS $70-MIL. BONDS EXPOSURE ----------------------------------------------------------------- Bank of Communications Co., Ltd., said that as of Sept. 15, 2008, it holds US$70.02 million bonds issued by Lehman Brothers Holdings Inc. and its subsidiaries. Those bonds account for 0.02% of BoCom's total assets and 0.35% of BoCom's net assets as of June 30, 2008. BoCom said in a filing with the Stock Exchange of Hong Kong Limited that it will closely monitor the development of the Lehman bankruptcy filing, promptly assess any risk related to the filing, make corresponding impairment allowance in a prudent manner, and safeguard its assets to the greatest extent in accordance with the relevant laws and regulations. BoCom does not expect the Lehman bankruptcy filing to have any significant impact on its financial position. Europe's top lender, HSBC Holdings Plc, holds a 19% stake in BoCom. ----------------------------------------------------------------- [00110] CHINA'S SKYFAME REALTY ISSUED $44-MIL. NOTES TO LEHMAN ----------------------------------------------------------------- Skyfame Realty (Holdings) Limited (HKSE: 00059) confirmed in a statement posted at the Stock Exchange of Hong Kong, Ltd., that as of Sept. 18, 2008, Lehman Brothers holds US$44 million in principal value of certain convertible notes it issued. The current aggregate outstanding principal value of the Convertible Notes is US$192 million, Skyfame relates. Skyfame Realty issued the disclosure at the request of HKSE, which sought an explanation of the company's shares decline. ----------------------------------------------------------------- [00111] FRANCE'S SCOR SE HAS EUR35-MIL. EXPOSURE TO LEHMAN ----------------------------------------------------------------- Scor SE has EUR35,000,000 exposure to Lehman Brother Holdings Inc., reports Fabio Benedetti-Valentini of Bloomberg News. "Our exposure towards Lehman is not material. We have 35 million euros, mainly in senior notes. At this point in time, we expect significant recoveries in these notes," Scor said in a statement, according to Bloomberg. With headquarters in Paris-France, SCOR SE provides treaty and facultative reinsurance on a worldwide basis to property-casualty and life insurers. SCOR SE operates in over 20 countries through its subsidiaries, branches and representative offices, and provides services in more than 130 countries. ----------------------------------------------------------------- [00112] MEXICO'S BANORTE TAKES ON $20-MIL. LOSS ON LEHMAN NOTES ----------------------------------------------------------------- Grupo Financiero Banorte SAB, Mexico's largest publicly traded lender, may incur losses of up to $20 million in Lehman Brothers Holdings Inc. notes, representing about 1.8% of Banorte's 2008 recurring earnings, Bloomberg News reports. According to Bloomberg, Banorte will either take an impairment charge or post a loss on the notes in the fourth quarter. The effect of Banorte's projected loss may be offset by gains on shares in Visa Inc. that Banorte received when the card company sold its stock to the public in March, Bloomberg says. To recall, Lehman brothers filed for bankruptcy protection on September 15, 2008, which triggered a slide in equity and credit markets. ----------------------------------------------------------------- [00113] GLG HAS IMMATERIAL EXPOSURE; LEHMAN HAS 13.7% STAKE ----------------------------------------------------------------- NEW YORK -- September 16, 2008 -- GLG Partners, Inc and its subsidiaries (NYSE: GLG) is providing this update of its funds' exposure to Lehman Brothers Holdings Inc. and its subsidiaries and other counterparties following the events of this past weekend. Over the past few months, GLG has devoted considerable time and effort to manage counterparty risk exposures with respect to its prime brokers and other counterparties, including Lehman, Merrill Lynch and AIG. All of the GLG Funds have at least two prime brokers and in nearly all cases, at least one prime broker is a commercial bank. Following this action, GLG confirms that the GLG Funds have no counterparty risk exposure to either Merrill Lynch or AIG. With respect to Lehman, GLG last week transferred substantially all of the remaining positions of the GLG Funds to other prime brokers. The majority of these transfers have already settled and we expect the remainder to settle shortly. We believe the residual exposure of the GLG Funds to Lehman will not be material. Lehman is also a shareholder in GLG, owning approximately 33.7 million shares. Its share ownership in GLG is held by Lehman (Cayman Islands) Limited, a Cayman Islands company. Lehman (Cayman Islands) Limited is party to GLG's Shareholder's Agreement, the terms of which restrict the sale of any GLG shares owned by Lehman until November 2, 2008. After November 2, 2008, 25% of the total shares held by Lehman (approximately 8.4 million shares) become free of the transfer restrictions in the Shareholder's Agreement. The remaining shares will be restricted under the terms of the Shareholder's Agreement until November 2, 2009, when a further 25% becomes free, and November 2, 2010, when all shares become free, of the lock-up. About GLG GLG, one of the largest alternative asset managers in the world, offers its base of long-standing prestigious clients a diverse range of investment products and account management services. GLG's focus is on preserving client's capital and achieving consistent, superior absolute returns with low volatility and low correlations to both the equity and fixed income markets. Since its inception in 1995, GLG has built on the roots of its founders in the private wealth management industry to develop into one of the world's largest and most recognized alternative investment managers, while maintaining its tradition of client-focused product development and customer service. As of June 30, 2008, GLG managed net AUM of over $23.0 billion. ----------------------------------------------------------------- [00114] 7 PHILIPPINE BANKS HAVE $386-MIL. EXPOSURE TO LEHMAN ----------------------------------------------------------------- According to reports, estimates by the Central Bank of the Philippines say that seven domestic banks have exposure totaling $386 million to Lehman Brothers: Bank Exposure ---- -------- Banco de Oro Unibank $134 million Development Bank of the Philippines $90 million Metropolitan Bank and Trust Co. $71 million Rizal Commercial Banking Corp. $40 million Standard Chartered Bank $26 million Bank of Commerce $15 million United Coconut Planters Bank $10 million According to the report, the exposure accounted between 0.5% and 1.7% of total assets, .on an individual basis, according to estimates which were discussed at the meeting of the Central Bank's policy-making Monetary Board Sept. 18. As previously reported, RCBC said it is allocating PHP980 million (US$20.7 million) from its current excess reserves, to account for the exposure. Metro Bank, has made provisions of $14 million, as a result of direct exposure to Lehman bonds of US$20.4 million and made provisions equivalent to US$14 million using current market prices. Banco de Oro said it is setting aside provisions totaling PHP3.8 billion (US$80.2 million) to cover its exposure to Lehman. 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 bank said the loan status is current and the Lehman unit is in normal operations. Two more banks, Allied Banking Corp. (ABC.PH) and Philippine Bank of Communications (PBC.PH), have confirmed that they have confirmed that they have no exposures to Lehman. Six banks, namely Philippine Savings Bank, Security Bank Corp., UnionBank, China Banking Corporation, Bank of the Philippine Islands, and Export and Industry Bank, earlier disclosed that they have no direct or indirect exposure to Lehman Brothers. 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." ----------------------------------------------------------------- [00115] VENEZUELA MAY LOSE $225MM IN INVESTMENTS ON LEHMAN NOTES ----------------------------------------------------------------- According to El Universal, the Venezuelan government stands to lose $225,000,000 on investments in Lehman Brothers Holdings Inc. securities. The notes Venezuela acquired for $300,000,000 may be worth only $75,000,000 now, El Universal said. The daily continued that Venezuela may decide to wait until the notes expire in 2009/2010 in the hopes that will produce a higher return, rather than selling the bonds now. Venezuela's Finance Minister Ali Rodriguez said that "the effect of the U.S. banking crisis on Venezuela seemed limited, but the ministry was evaluating the situation," El Universal reported. However, Mr. Rodriguez declined to comment on the report, Bloomberg News said. Two private banks in Venezuela also have investments of up to $400,000,000 in notes from Lehman Brothers, according to El Universal. Venezuelan President Hugo Chavez gloated over Lehman Brothers' collapse after the bank's criticism of Venezuelan economy. "They were always producing negative reports about Venezuela. They forgot about themselves. . . and 'boom!' they were bankrupt," Reuters quoted Mr. Chavez as saying. ----------------------------------------------------------------- [00116] CONTINENTAL HAS FUEL HEDGES WITH LEHMAN BROTHERS ----------------------------------------------------------------- Continental Airlines told the Associated Press that it has fuel- hedging contracts with bankrupt Lehman Brothers. The hedging transactions were designed to limit Continental's exposure to high fuel prices, which have pushed large U.S. airlines to massive losses in the second quarter of 2008. Gerry Laderman, senior vice president at Continental, however, said that with the recent drop in prices of oil, airlines could lose money on those hedges. "I guess lucky for us we are out of the money on those hedges, so we owe them money," Mr. Laderman said. "We won't be a creditor, but that's OK," he added. ----------------------------------------------------------------- [00117] GLAXOSMITHKLINE DEAL WITH LEHMAN FINANCE TERMINATED ----------------------------------------------------------------- GlaxoSmithKline PLC said in a filing with the Securities and Exchange Commission that its agreements with Lehman Brothers Finance S.A., with respect to a total of 20 million shares of common stock of Quest Diagnostics Inc., have been terminated. SKB and Lehman Brothers Finance S.A .entered into an ISDA Master Agreement, dated as of May 21, 2002 as amended. On May 21, 2002, SKB and Lehman entered into five transactions governed by the ISDA Master Agreement, each of which initially related to 1,000,000 shares of common stock of Quest Diagnostics. On June 7, 2006, each 2002 Transaction was extended and at the time of extension, each 2002 Transaction related to 2,000,000 shares as a result of a stock split on June 20, 2005. On February 15, 2007, SKB and Lehman entered into five transactions governed by the ISDA Master Agreement, each of which related to 2,000,000 shares. Lehman Brothers Holdings, Inc., is the guarantor under the ISDA. GSK said that upon the bankruptcy filing by Lehman Brothers Holdings Inc., the Transactions automatically terminated in accordance with the terms thereof. The Wall Street Journal says that GSK has requested that the shares, which were pledged under the Variable Sales Forward Agreements and held in custody by Lehman Brothers Inc, be returned to GSK. GSK expects that the recent developments involving Lehman will have no material financial impact, according to the report. ----------------------------------------------------------------- [00118] TEXAS STATE CUTS SERVICE CONTRACTS WITH LEHMAN AFFILIATE ----------------------------------------------------------------- According to the Dallas Business Journal, Texas Controller Susan Comb said she had terminated the state's service contracts with Lehman Brothers, Inc., a subsidiary of the bankrupt Lehman Brothers Holdings Inc. Lehman Brothers was engaged to render marketing and client services to the state's investment programs -- TexPool and TexPool Prime, which Ms. Comb said are managed by a separate firm, Federated Investors Inc. Although Lehman's Chapter 11 filings do not affect the local governments' investment in TexPool and TexPool Prime, Ms. Comb said terminating the Lehman contracts was necessary to maintain investors' confidence. "Investors are currently suffering the effects of one of the greatest crises of confidence in the capital markets in recent memory," Ms. Comb said. "Given Lehman Brothers' declaration of bankruptcy, the fragile state of the capital markets and the heightened sensitivity of investors to adverse news, the continued affiliation of TexPool with Lehman Brothers is unacceptable," she added. Ms. Comb further clarified that Lehman did not provide investment management services to TexPool and TexPool Prime, the report said. Federated Investors will take over the marketing and client on TexPool and TexPool Prime after Lehman completes transition in 30 days, the report said. ----------------------------------------------------------------- [00119] MARK SHAFIR OF LEHMAN'S MERGER & ACQUISITION JOINS CITI ----------------------------------------------------------------- NEW YORK, New York -- Sept. 18, 2008 -- Citi announced the appointment of Mark Shafir as Head of Global Mergers and Acquisitions. Mr. Shafir brings 23 years of Wall Street experience to his new role, leading Citi's No. 2-ranked M&A franchise. Mr. Shafir joins Citi from Lehman Brothers, where he was Chairman and Co-Head of Mergers and Acquisitions. At Citi, he will report to Raymond J. McGuire and Alberto J. Verme, co-heads of Investment Banking. He fills the role vacated in June when Frank Yeary retired from the firm to become a vice chancellor at the University of California, Berkeley. "Mark brings a track record of building and leading M&A teams across Wall Street as well as deep client relationships and experience. We are sure his focus on clients and talent will help our M&A franchise maintain and build upon the significant momentum it has displayed this year," said Messrs. McGuire and Verme. Citi has advised on some of the largest acquisitions announced in 2008, including Anheuser-Busch's $61 billion sale to Inbev Inc., Time Warner Cable's $39 billion separation from Time Warner Inc. and Dow Chemical's $19 billion acquisition of Rohm & Haas. "Citi's M&A business is among the best on Wall Street, and the firm's global capabilities, strong client relationships and talented team position it for continued success. I'm extremely excited to join and lead this impressive franchise," Mr. Shafir said. Among his most recent assignments, Mr. Shafir advised Hewlett-Packard on its $13.9 billion acquisition of Electronic Data Systems, CME Group on its $9.5 billion purchase of Nymex Holdings and Teva Pharmaceutical Industries Ltd on its $9 billion acquisition of Barr Pharmaceuticals, Inc. Mr. Shafir began his career in 1985 at Goldman Sachs. He holds a bachelor's degree from Yale University, an MBA from the University of Pennsylvania and was a Marshall Scholar at Cambridge University's Kings College. Additionally, David Kirshenbaum will become Deputy Head of Global M&A. In this role, Mr. Kirshenbaum will work closely with Mr. Shafir to lead the business. Mr. Kirshenbaum will continue in his current role as Head of Business Selection. About Citi Citi, the leading global financial services company, has some 200 million customer accounts and does business in more than 100 countries, providing consumers, corporations, governments and institutions with a broad range of financial products and services, including consumer banking and credit, corporate and investment banking, securities brokerage, and wealth management. Citi's major brand names include Citibank, CitiFinancial, Primerica, Citi Smith Barney and Banamex. Additional information may be found at www.citigroup.com or www.citi.com. * * * According to a report by The Wall Street Journal, Lehman Brothers Holdings' Merger and Acquisition Co-head, Mark G. Shafir was offered the post by Citigroup, Inc., prior to Lehman's Chapter 11 filing. WSJ's report said Mr. Shafir's defection to Citigroup underscores a key risk to Barclays who acquired Lehman for $1.75 billion. Barclays President Robert E. Diamond, Jr., reportedly gave priority to senior Lehman bankers' retention, as Court papers on the Chapter 11 case indicated that the retention of a substantial majority of "key" and eight "critical" employees is a condition precedent to the closing. Mr. Shafir, however, is not among the eight critical employee, according to a person close to Barclays, the report disclosed. Barclays, this person said, was aware of Mr. Shafir's pending departure who, according to the report, spent last weekend helping arrange a rushed sale to Barclays. Mr. Shafir succeeded Frank Yeary as global head of Lehman's M&A. Mr. Shafir's brother, Rob, who now connected at Credit Suisse Group's asset-management business, also left Lehman after his time as executive at the firm. ----------------------------------------------------------------- [00120] TWO KEY LEHMAN BROKERS MAY JOIN CREDIT SUISSE ----------------------------------------------------------------- As Lehman Brothers Holdings Inc. is trying to sell its European investment bank, Credit Suisse Group AG is also in talks to hire the bankrupt firm's bankers, Stuart Field and Ed Matthews, Bloomberg news said in a report. People knowledgeable of the matter but who refused to be identified said Messrs. Field and Matthew, both managing partners at Lehman's broking unit, have yet to sign contracts to join Credit Suisse's U.K. investment banking team, the report said. "Most of the banks will continue to cherry-pick from Lehman," Shaun Springer, chief executive officer of Napier Scott Executive Search Ltd. in London, was quoted as saying. "Anyone who isn't covering their options at the moment doesn't understand the futures market," he said in the report. Messrs. Field and Matthew, who have advised European companies including Carlsberg A/S and Cineworld Group Plc, the U.K. cinema operator will follow Philippe Cerf who Credit Suisse hired to run the firm's mergers in continental Europe. Other Lehman executives also followed suit, including head of wealth funds, Makram Azar, who joined KKR & Co. LP to take charge of the leverage buyout firm's expansion into the Middle East and Africa. ----------------------------------------------------------------- [00121] RESERVE PRIMARY FUND SUED AFTER $785M LEHMAN EXPOSURE ----------------------------------------------------------------- As widely reported, Reserve Primary Fund, the oldest U.S. money- market fund, was sued by shareholders before the U.S. District Court for the Southern District of New York (Manhattan) after its shares dropped below $1 due to losses from exposures to Lehman Brothers Holdings, Inc. A group of investors accused the oldest U.S. money market fund of violating the Federal Investment Company Act by deviating from the policy stated in its registration statement after writing off $785 million in debt issued by Lehman. According to Bloomberg, shareholders pulled more than 60% of the Fund's $64.8 billion in assets in the two days since Lehman filed for a voluntary Chapter 11 petition on Sept. 15. Reserve Primary Fund declared, on Sept. 16, that its Board of Trustees, after reviewing the unprecedented market events of the past several days, said that it had valued to zero the $785 million in debt securities issued by Lehman Brothers. "As a result, the NAV of the Primary Fund, effective as of 4:00 PM, is $0.97 per share. All redemption requests received prior to 3:00 PM today will be redeemed at a net asset value of $1.00 per share," the fund's Board of Trustee said. Reserve Primary Fund said the proceeds of redemptions will be transmitted after seven days. The Primary Fund will continue to accept purchase orders. Reserve Management Company, Inc., is the fund's investment manager. ----------------------------------------------------------------- [00122] NEW JERSEY PENSION FUND MAY SUE LEHMAN FOR $115-MIL. LOSS ----------------------------------------------------------------- The State of New Jersey's pension fund incurred approximately $115,000,000 in losses on its $200,000,000 investment in Lehman Brothers Holdings Inc., which "may be subject to litigation down the road," said William Clark, director of the State's Division of Investment, according to Bloomberg News. New Jersey bought the Lehman stock to boost returns for a $76,000,000,000 investment fund, which the State utilizes to fund pensions, and serves as a short-term investment vehicle for the State and its municipalities. Mr. Clark alleged that New Jersey officials were not provided with accurate information before they paid into the bank. New Jersey workers worry the Investment Department's oversight means the State cannot guarantee that their pension funds -- which equates to 4,000 pension salaries -- will be safe, says the Associated Press. "We made a mistake -- and boy we made a big one on this stock," Mr. Clark admitted during a State Investment Council meeting. Mr. Clark pointed out, however, that the Lehman investment represented less than 1% percent of New Jersey's overall pension fund. The State could have lost more absent its sale of other financial services stocks that financed the Lehman purchase, he said. ----------------------------------------------------------------- [00123] PUTNAM HAS NO EXPOSURE TO LEHMAN, CLOSES MARKET FUND ----------------------------------------------------------------- BOSTON, Massachusetts -- September 18, 2008 -- The Board of Trustees of the Putnam Funds announced that it has voted to close the institutional Putnam Prime Money Market Fund, effective as of 5:00 p.m. on September 17, 2008, and distribute all fund assets. Putnam Prime Money Market Fund is offered to institutional clients with a minimum initial investment of $10 million. The Trustees' action was not related to the portfolio's credit quality, but was instead a reaction to marketwide liquidity issues. The fund, like Putnam's other money market funds, has no exposure to securities of Lehman Brothers, Washington Mutual or AIG at the parent-company level. The fund's net asset value calculated on September 16, 2008 was $1.00 per share. On September 17, the fund experienced significant redemption pressure. Serious constraints on liquidity in money market instruments created the risk that in order to process redemptions, the fund would realize losses in selling its portfolio securities. In the face of these challenges, the Trustees determined to close the fund to ensure equitable treatment of all fund shareholders. Putnam and the Trustees believe that this action is in the best interests of shareholders because it ensures an orderly distribution of assets in light of the current unusual market conditions and treats all shareholders in an equitable manner. Putnam and the Trustees are working to develop a detailed plan of distribution, with the goal of providing shareholders with the opportunity to receive distributions as expeditiously as possible, depending on market conditions. The Fund intends to provide additional information shortly regarding the plan as part of ongoing communications to shareholders. The action that the Board has taken is specific to the institutional Putnam Prime Money Market Fund in response to that fund's specific circumstances. This decision does not relate to other Putnam funds, including the retail Putnam Money Market Fund and Putnam VT Money Market Fund, or to stable value funds managed by Putnam for defined contribution clients. About Putnam Founded in 1937, Putnam Investments is one of the nation's oldest and largest money management firms. As of August 31, 2008, Putnam managed $163 billion in assets, of which $96 billion is for mutual fund investors and $67 billion is for institutional accounts. Putnam has offices in Boston, London and Tokyo. For more information, go to www.putnam.com. Putnam's Distributions for Open-End Funds The Trustees of The Putnam Funds declared distributions of certain funds at a meeting held on September 11, 2008. Record date of the funds is September 18, while payment date is September 22. Fund Name and Distribution Investment Income -------------------------- ----------------- Putnam American Government Income Fund $0.0270/Share - Class B Shares (PAMBX) Putnam American Government Income Fund $0.0270/Share - Class C Shares(a) Putnam American Government Income Fund $0.0310/Share - Class M Shares (PAMMX) Putnam American Government Income Fund $0.0310/Share - Class R Shares (PAMRX) Putnam American Government Income Fund $0.0350/Share - Class Y Shares(a) Putnam Asset Allocation: Balanced $0.0660/Share Portfolio - Class B Shares (PABBX) Putnam Asset Allocation: Balanced $0.0670/Share Portfolio - Class C Shares (AABCX) Putnam Asset Allocation: Balanced $0.0740/Share Portfolio - Class M Shares (PABMX) Putnam Asset Allocation: Balanced $0.0830/Share Portfolio - Class R Shares (PAARX) Putnam Asset Allocation: Balanced $0.0950/Share Portfolio - Class Y Shares (PABYX) Putnam Asset Allocation Conservative $0.0240/Share - Class B Shares (PACBX) Putnam Asset Allocation Conservative $0.0240/Share - Class C Shares (PACCX) Putnam Asset Allocation Conservative $0.0260/Share - Class M Shares (PACMX) Putnam Asset Allocation Conservative $0.0280/Share - Class R Shares (PACRX) Putnam Asset Allocation Conservative $0.0320/Share - Class Y Shares (PACYX) (a) Quotron symbol pending Fitch Downgrades Putnam's Market Fund NEW YORK, New York -- September 18, 2008 -- Fitch Ratings has downgraded the rating of the Putnam Prime Money Market Fund (Institutional) to 'AAA/V1' from 'AAA/V1+'. In addition, Fitch has placed Putnam Prime Money Market Fund (Institutional) on Rating Watch Negative. The rating actions follow the decision of the Board of Trustees of Putnam Funds to close Putnam Prime Money Market Fund (Institutional) and formulate a plan for liquidation of all assets of the fund for distribution to investors. The downgrade of the volatility rating reflects the suspension of same day liquidity for investors. The Rating Watch Negative status of both the credit rating and volatility ratings reflects the current uncertainty as to the terms and conditions of the liquidation plan. Resolution of the Rating Watch Negative status will be dependent upon the plan and its implementation and the then credit and liquidity profile of fund assets. Depending on the course of action undertaken by Putnam Investments with respect to the liquidation of the fund, investors could experience a principal loss. Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, 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. ----------------------------------------------------------------- [00124] LEHMAN BROTHERS SHAKES GAMING SECTOR ----------------------------------------------------------------- Shares of gaming companies traded low after a Deutsche Bank analyst mentioned that some companies' credit agreements in the sector have some exposure to Lehman Brothers, The Associated Press reports. According to the report, these companies have ties to Lehman: Company Lehman Link ------- ----------- Las Vegas Sands Corp three credit agreements with biggest coming from a Singapore credit line Penn National Gaming, Inc. term loan B credit facility Pinnacle Entertainment, Inc. $48 million of $625 million credit agreement ----------------------------------------------------------------- [00125] LEHMAN U.K. CASE MORE COMPLEX THAN ENRON'S, SAYS PWC ----------------------------------------------------------------- See prior related entry at [00006] (Lehman Brothers International (Europe) in Administration). Lehman Brothers Holdings Inc.'s winding down in the United Kingdom will be larger and more complex than that of Enron or MG Rover, Chris Marshall of City Wire reports, citing PricewaterhouseCoopers LLP, the court-appointed administrators for the Debtor's case. PricewaterhouseCoopers stated in a press conference that parts of Enron had required six years of work, according to the report. Early this week, PwC had said that more Lehman employees will be notified about job cuts, City Wire relates. PwC also said it is unsure if the US$75 million salary, gross of tax, would be be paid, City Wire notes. PwC commented that it's a surprise that "a business as huge as [Lehman Brothers] can fail," City Wire relates. The report discloses that several dozens of PwC staff working in Lehman Brothers' building in Canary Wharf. ----------------------------------------------------------------- [00126] SKYPOWER, LEHMAN UNIT, STAYS IN BUSINESS ----------------------------------------------------------------- SkyPower Corp. which has invested in more than 200 wind and solar energy projects across Canada and the United States, says it's not part of the bankruptcy process at Lehman Brothers Holdings, CBC News reported. According to the report, SkyPower, which has several Lehman executives on its board of directors and bills itself as a Lehman Brothers company, issued a statement saying that the company remains focused on its plan and committed to pursuing the renewable energy projects in its Canadian and International portfolios. Lehman took an equity stake in SkyPower in June 2007. In a report by The Chronicle Herald, Barry Zwicker, president of Scotian WindFields, the other major player in the 1,100-hectare wind park, said Lehman's misfortune won't affect the wind farm. "We were never reliant on Lehman Bros. We always said we would make the best deal for the project." Mr. Zwicker said in a report. ----------------------------------------------------------------- [00127] RULE 2019 STATEMENT - Willkie Farr & Gallagher LLP ----------------------------------------------------------------- Pursuant to Rule 2019 of the Federal Rules of the Bankruptcy Procedure, Marc Abrams, Esq., at Willkie Farr & Gallagher LLP, in New York, notifies the Court that his firm represents five entities in the Debtors' cases: (i) AIG Financial Products Corp. 70 Pine Street, 10th Floor New York, NY 10270 (212) 770-7876 (ii) AIG Global Investment Corp. 70 Pine Street, 10th Floor New York, NY 10270 (212) 770-7876 (iii) Bloomberg LP, Bloomberg Finance LP and their affiliates 731 Lexington Avenue New York, NY 10022 (212) 318-2000 (iv) IntraLinks, Inc. 150 East 42nd Street 8th Floor New York, NY 10017 (212) 543-7735 (v) Jarden Corporation and its affiliates 555 Theodore Fremd Avenue Rye, NY 10580 (914) 967-9400 Mr. Abrams relates each of the entities hold claims and interest in the Debtors arising from applicable agreements, law or equity. Furthermore, Mr. Abrams assures the Court that his firm does not possess any claims or interest against the Debtors. ----------------------------------------------------------------- [00128] FITCH ASSIGNS RECOVERY RATINGS TO LEHMAN SUBSIDIARIES ----------------------------------------------------------------- Chicago -- September 18, 2008 -- Fitch Ratings has assigned Recovery Ratings (RR) to several issues of Lehman Brothers Holdings Inc. (LBHI) and certain subsidiaries. Recovery ratings for LBHI were assigned based on an evaluation of the consolidated balance sheet, adjusting for potential sales and asset reductions in an orderly wind down. Analysis includes adjustments to assets based on third-quarter 2008 earnings announcements and assumes netting of derivatives and terminations were accomplished. A range of discounts was applied to asset values assuming sales will be conducted in a distressed market; however, a present value discount was not applied. An expected recovery range between 30% and 50% resulted in an 'RR4' assigned to senior debt. There is no recovery expected for subordinated or preferred debt and therefore, an 'RR6' has been assigned. The same Recovery Ratings are applied to Lehman Brothers Holdings plc, an interim holding company. Recovery ratings for LBI are assigned based on an analysis of the Asset Purchase Agreement between LBHI and Barclays Bank as proposed to the bankruptcy court Sept. 17, 2008 and assumes approval of this agreement. Barclay's has proposed to purchase trading assets and liabilities in addition to fixed assets of Lehman's U.S.-based operations. In addition, they will provide employee compensation to approximately 10,000 employees. The analysis assumes no additional cash received although the Agreement provides for potential earn-out fees based on future performance of the trading assets and the potential for future asset sales in non- U.S.-related entities. Closing of the Agreement is contingent upon LBI being placed into liquidation under the SIPA. Fitch estimated a level of remaining assets largely comprised of securities inventory which includes exposures to residential mortgages, and high-yield-funded loans. There is minimal unsecured debt issued directly by LBI as of May 31, 2008 and thus, we assume a significant portion of these assets are available to LBI direct creditors and excess cash and assets will be provided to LBHI. Fitch assigns RRs to the following: Lehman Brothers Holdings Inc. --Senior unsecured debt of 'CCC/RR4'; --Subordinated debt of 'C/RR6'; --Preferred stock of 'C/RR6. Lehman Brothers Inc. --Senior debt of 'B/RR1'; --Subordinated debt of 'B-/RR2'. Lehman Brothers Holdings plc --Senior unsecured debt of 'CCC/RR4'; --Subordinated debt of 'C/RR6'. Lehman Brothers Holdings Capital Trust III - VII --Preferred stock of 'C/RR6'. Lehman Brothers UK Capital Trust LP, II and III --Preferred stock of 'C/RR6 Lehman Brothers E-Capital Trust I --Preferred stock of 'C/RR6. 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. ----------------------------------------------------------------- [00129] FITCH WITHDRAWS AAA/VI+ RATINGS TO CERTAIN LEHMAN FUNDS - ---------------------------------------------------------------- New York -- September 18, 2008 -- Fitch Ratings has withdrawn the 'AAA/V1+' credit and volatility ratings assigned to the following funds managed by Lehman Brothers Asset Management: -- Lehman Brothers Institutional Liquidity Government Portfolio -- Lehman Brothers Institutional Liquidity Treasury Portfolio -- Prime Master Series -- Lehman Brothers Institutional Liquidity Prime Portfolio -- Cash Management Prime Portfolio -- Prime Fund -- Prime Reserve Portfolio -- Neuberger Berman Prime Money Fund -- Municipal Master Series -- Lehman Brothers Institutional Liquidity Municipal Portfolio -- Lehman Brothers National Municipal Money Fund -- Tax-Exempt Master Series -- Lehman Brothers Institutional Liquidity Tax-Exempt Portfolio -- Lehman Brothers Tax-Free Money Fund -- Lehman Brothers Euro Liquidity Fund -- Lehman Brothers Sterling Liquidity -- Lehman Brothers US Dollar Liquidity Fund The ratings withdrawals reflect the uncertain and evolving status of Lehman Brothers Asset Management's, strategic direction and stability of its investment platform following the bankruptcy filing by its parent company, Lehman Brothers Holding Inc. While to date these funds have been managed in a conservative manner, Fitch also notes that historically, Lehman affiliates and related operational units have been significant investors in these funds and their fund investments have been meaningfully reduced. In combination, these factors are deemed inconsistent with maintenance of a 'AAA/V1+' rating. Fitch's process for rating money market funds is described in detail in the following Fitch reports, both of which are available at 'www.fitchratings.com': --'U.S. Money Market Fund Ratings' (March 3, 2006); --'European Money Market Fund Ratings' (March 6, 2006). 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. ----------------------------------------------------------------- [00130] FITCH'S RATINGS ON LEHMAN NO EFFECT ON RADAMANTIS ----------------------------------------------------------------- London -- September 18, 2008 -- Fitch Ratings said that this week's downgrade of Lehman Brothers Holding Inc. (Lehman) and various subsidiaries to 'D' from 'A+' has no rating impact on Radamantis (European Loan Conduit No. 24) plc (Radamantis). The transaction is a securitisation of four loans, each secured by a single asset. A subsidiary of Lehman signed a lease for floors 11 to 14 in the South Quay Plaza property, which forms the collateral for the GBP74.2m loan of the same name. The contracted rent for Lehman is GBP1.75m per annum, equating to 19% of the loan's, and 4.3% of the transaction's, rental income. As all four loans are performing and South Quay Plaza's cash flow would remain relatively strong even without rental payments from Lehman, Fitch is not taking rating action at this point. In July 2008, South Quay Plaza's interest coverage ratio (ICR) stood at 1.74x, compared to a cash trap trigger of 1.25x and a default covenant of 1.1x. This excludes Lehman's rent due to the existence of a 19 months rent-free period which will expire in January 2009. The loan is interest-only and the only facility without a subordinated B note in Radamantis, with the lowest loan-to-value (LTV) on both securitised and whole loan basis (58.7% based on the original valuation of GBP126.5m). The underlying asset is an office property in London's Docklands, adjacent to Canary Wharf. Radamantis' notes are currently rated as follows: GBP315m Class A (XS0263691346): 'AAA' Outlook Stable Class X (XS0263696172): AAA' Outlook Stable GBP64m Class B (XS0263697111): 'AAA'; Outlook Stable GBP25m Class C (XS0263697970): 'AAA'; Outlook Stable GBP18.4m Class D (XS0263698945): 'AA'; Outlook Stable GBP39.13m Class E (XS0263700279): 'A'; Outlook Stable GBP14m Class F (XS0263700782): 'A-' (A minus); Outlook Stable GBP18m Class G (XS0263695172): 'BBB'; Outlook Stable Fitch will continue to monitor the performance of the transaction. Updated surveillance information and the new issue report can be found on the agency's subscription website, www.fitchratings.com. For topical commentary on the European structured finance market, along with global capital markets coverage, please see www.fitchratings.com/capitalmarkets. ----------------------------------------------------------------- [00131] FITCH ASSESSES IMPACT OF LEHMAN BANKRUPTCY ON CDO RATINGS ----------------------------------------------------------------- London/New York/Singapore -- September 18, 2008 -- 0Fitch Ratings is currently assessing the potential rating impact of the bankruptcy of Lehman Brothers Holdings Inc. (LBHI) on synthetic collateralised debt obligations (CDOs) that it rates. Following LBHI's declaration of bankruptcy on 15 September Fitch downgraded the Issuer Default Rating (IDR) and debt ratings of LBHI and its parent, Lehman Brothers Inc., along with other subsidiaries. These downgrades may adversely impact the ratings of synthetic CDOs whose credit quality is linked in some way to that of Lehman-related entities. As a result, Fitch has placed 23 tranches of CDO transactions on Ratings Watch Negative (RWN). Lehman acted as CDS swap counterparty in 27 Fitch-rated public synthetic CDOs (and 35 private CDOs); 12 (17 private) in Europe; 15 (15 private) in Asia and three private in the U.S. In many of these transactions, Lehman Brothers Special Financing Inc. acted as the buyer of credit protection from the CDO as CDS swap counterparty, and LBIH acted as a guarantor or credit support provider. The impact on CDO note ratings where a Lehman entity acts as swap counterparty will depend upon many factors, including whether the swap may be transferred to another counterparty, whether the CDO transaction faces an automatic unwind following the Lehman bankruptcy, and the extent to which noteholders may be subject to market value risk of eligible securities in the event of early termination of the transaction. Should the swap counterparty, guarantor, or credit support role not be taken over by another adequately rated institution, Fitch expects early termination events to be triggered, if not immediately, then within a 30 day timescale. If an early termination is triggered where the swap counterparty is the defaulting party, the eligible securities would be either liquidated and used to repay the CDO notes before any swap termination payment is potentially due to LBHI, or would be delivered to the noteholders. In these instances, the CDO noteholders' risk profile may shift from the portfolio of reference entities to either the liquidation value or to the ongoing credit and market risk of the eligible securities. In the liquidation scenario, the CDO noteholders will either be paid in full from proceeds of the eligible securities, or will incur a shortfall if the proceeds are less than the outstanding amount of the notes, plus any accrued and unpaid interest. In the three private US transactions, collateral-posting arrangements were in place to cover any difference between the market value of the eligible securities and the outstanding balance of the notes, should early termination occur. In such cases, the loss to noteholders would be expected to be limited. For the remaining 27 (32 private) transactions, collateral- posting arrangements were documented to come into force only following the swap counterparty's, guarantor's, or credit support provider's Short-term rating being downgraded below 'F1'. Since it is not expected that LBHI will meet its collateral-posting obligations, should early termination occur, the noteholders would be subject to market value risk on the eligible collateral, and the noteholders may lose some portion of their investment, depending on the current market value of the eligible securities. As a result, Fitch expects that an early termination may result in the downgrade of the notes to the 'CCC' category or below despite the fact that recoveries may be good to high in many cases. As a result, Fitch has placed the 23 tranches on RWN (and is maintaining 11 on RWN), a detailed list of which is available for free at: http://ResearchArchives.com/t/s?3265 ----------------------------------------------------------------- [00132] FITCH REVIEWS U.S. SF TRANSACTIONS EXPOSURE TO LEHMAN ----------------------------------------------------------------- New York -- September 18, 2008 -- Fitch Ratings has reviewed Lehman Brothers Holdings Inc.'s (LBHI) and subsidiaries' counterparty exposure in U.S. Structured Finance(SF) transactions, following its downgrade of LBHI long- and short- term Issuer Default Ratings (IDRs) to 'D' on its declaration of bankruptcy. The following SF asset classes have exposure to Lehman Brothers Special Financing Inc. as a swap counterparty: one ABS Auto Loan transaction, two ABS Student Loan transaction, one CMBS transaction and nine RMBS transactions. Specific transaction documents will dictate subsequent mitigating actions, which can include the posting of collateral, a guarantee from another entity, the replacement of a counterparty, or termination of the contract. As more details of individual transactions materialize, further deal-specific commentary or rating actions will be made. Transactions materially exposed to LBHI-related entities in other capacities will be reviewed individually as quickly as possible. ----------------------------------------------------------------- [00133] FITCH SAYS 87 FUNDS INSULATED FROM EXPOSURE TO LEHMAN ----------------------------------------------------------------- New York/Paris -- September 17, 2008 -- Fitch Ratings has reviewed portfolio exposures to the Lehman Brother Holding Inc. (Lehman) bankruptcy filing for the 87 'AAA/V1+' (stable net asset value) money market funds Fitch rates globally. Based upon a review of portfolio holdings, which Fitch receives weekly, and discussions with fund investment managers, most 'AAA/V1+' rated fund advisors successfully anticipated deterioration of Lehman credits by taking risk-mitigating actions to eliminate exposures in their portfolios. In all but one 'AAA/V1+' rated money market funds, there was no exposure to unsecured Lehman debt. In the one instance of unsecured Lehman exposure, the fund sponsor promptly purchased the asset out of the fund. In those limited instances in which money market funds held counterparty exposure to Lehman, these exposures were fully collateralized by the U.S. Treasury and Government securities. Money market funds rated 'AAA/V1+' by Fitch maintain a dollar-weighted average maturity of 60 days or less and principally invest in high quality instruments that present minimal credit and liquidity risk to the portfolio. In addition, Fitch's money market fund ratings reflect the investment advisor's investment platform and ability to manage credit, interest rate and liquidity risk consistent with maintaining a stable net asset value. A complete list of the 87 money market funds rated AAA/V1+ by Fitch can be found on Fitch's website, www.fitchratings.com. Fitch process for rating money market funds is described in detail in a Fitch reports titled 'U.S. Money Market Fund Ratings' published on March 3, 2006 and 'European Money Market Fund Ratings' published on March 6, 2006. Both reports are available on the Fitch Ratings web site at 'www.fitchratings.com'. ----------------------------------------------------------------- [00134] FITCH AFFIRMS LEHMAN DERIVATIVE PRODUCTS' AAA RATINGS ----------------------------------------------------------------- New York -- September 17, 2008 -- Fitch Ratings has affirmed the 'AAA' long-term Issuer Default Rating (IDR) and counterparty ratings of Lehman Brothers Derivative Products Inc. (LBDP). This action follows the occurrence of a 'trigger event' that results in the imminent cessation of operations. On September 15, 2008, the parent of LBDP's sponsor, Lehman Brothers Holdings Inc. (LBHI), filed Chapter 11 bankruptcy for reorganization. LBDP's sponsor is Lehman Brothers Special Financing, a wholly owned over-the-counter derivatives company whose trading obligations are guaranteed by LBHI. LBDP had approximately $201 million in capital at September 09, 2008, exceeding the prescribed minimum. Excess capital is expected to be held as long as any trades and associated credit risk exist. LBDP's 'AAA' rating is predicated on its conservative capitalization, quality collateral, highly-rated counterparties, and restrictive operating guidelines. All trades intermediated by LBDP will be closed out or novated. Termination of all positions will occur as of September 23, 2008. Ratings will be withdrawn after all payments to LDBP and to counterparties have been made. ----------------------------------------------------------------- [00135] FITCH PLACES LEHMAN FINANCIAL PRODUCTS ON WATCH NEGATIVE ----------------------------------------------------------------- Chicago/New York -- September 17, 2008 -- Fitch Ratings has placed the 'AAA' Issuer Default Rating (IDR) and 'AAA' counterparty ratings for Lehman Brothers Financial Products Inc.'s (LBFP) on Rating Watch Negative as the portfolio will be transferred to its contingent manager, West LB following the declared bankruptcy of Lehman Brothers Holdings Inc. (LBHI). LBHI is the parent and guarantor of Lehman Brothers Special Financing, LBFP's sponsor. The guarantor's bankruptcy constitutes a 'trigger event' that requires the installation of a contingent manager to administer the trading book and facilitate an orderly wind-down of the portfolio. West LB is currently rated 'A-' (long-term IDR) and 'E' (Individual) by Fitch. LBFP's 'AAA' rating is based on its inherently conservative capitalization, high-quality counterparties, and limited credit risk. It is our expectation that these features will remain the cornerstone of the business. Capital levels remain in excess of its obligations and are not dependent upon receipt of any receivables from counterparties. Future capital levels should be protected by the existing excess and the anticipated hedges that will be established prior to the portfolio transfer to West LB. Importantly, West LB assumes no financial responsibility to mitigate or offset credit or market risk; however, Fitch is concerned about the operational requirements of LBFP and how West LB may conduct LBFP's administrative affairs. It is our expectation that LBFP and West LB systems and personnel will overlap for an extended period, allowing West LB sufficient time to demonstrate its managerial acumen. Fitch will review the process and flow of information during the transition and revisit the Rating Watch. The Rating Watch will be removed and ratings affirmed if capital levels, portfolio quality and operating efficiencies are maintained. Otherwise a ratings downgrade could result, but not likely to fall below the single 'A' range. Ratings may be withdrawn if portfolio information is insufficient to evaluate the portfolio in a timely fashion. ----------------------------------------------------------------- [00136] FITCH TO ASSESS LEHMAN EXPOSURE IN JAPANESE SF DEALS ----------------------------------------------------------------- London/Singapore/Tokyo -- September 17, 2008 -- Fitch Ratings has reviewed Lehman Brothers Holdings Inc.'s (LBHI) and subsidiaries' counterparty exposure in Japanese Structured Finance transactions, following its downgrade of LBHI's Long-and- Short-term Issuer Default Ratings (IDRs) to 'D' on its declaration of bankruptcy. The following list provides details of the transactions affected and the type of exposure: DTC Three Funding Ltd. - Liquidity Facility Provider (Lehman Brothers Japan Inc.) DTC Eight Funding Ltd. - Liquidity Facility Provider (Lehman Brothers Japan Inc.) G.K. L-JAC Four Funding - Liquidity Facility Provider (Lehman Brothers Japan Inc.) - Interest Rate Swap Counterparty (Lehman Brothers Special Financing Inc.) - Interest Rate Swap Guarantor (Lehman Brothers Holdings Inc.) L-JAC 5 Trust - Liquidity Facility Provider (Lehman Brothers Japan Inc.) - Interest Rate Swap Counterparty (Lehman Brothers Special Financing Inc.) - Interest Rate Swap Guarantor (Lehman Brothers Holdings Inc.) L-STaRS One Funding Limited - Liquidity Facility Provider (Lehman Brothers Japan Inc.) Specific transaction documents will dictate subsequent rating actions, which can include the posting of collateral, a guarantee from another entity, the replacement of a counterparty, or termination of the contract. As more details of individual transactions materialise, further deal-specific commentaries will be made or rating actions taken. ----------------------------------------------------------------- [00137] FITCH TO REVIEW TENDER OPTION BONDS WITH LEHMAN LIQUIDITY ----------------------------------------------------------------- New York -- September 16, 2008 -- Fitch has short-term ratings on approximately 260 tender option bonds (TOBs), based on liquidity provided by Lehman Brothers Holding Inc (LBHI). Of those, some also have long-term ratings based on credit enhancement provided by LBHI. The short-term rating on those TOBs will all be downgraded to 'D', based on LBHI's current short-term rating, which was downgraded to 'D' on September 15, 2008. For the TOBs whose long-term rating is based on credit enhancement from LBHI, the long-term rating will be revised to either the long-term rating of the underlying security within the TOB trust, if rated by Fitch, or withdrawn in those cases where Fitch does not rate the underlying security. The long-term ratings on the TOBs that are not based on LBHI will remain the same. The CUSIPs of the affected securities and the rating changes will be announced as soon as they are processed. Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, '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. ----------------------------------------------------------------- [00138] FITCH ASSESSES LEHMAN EXPOSURE IN 31 EUROPEAN RMBS DEALS ----------------------------------------------------------------- London-- September 16, 2008 -- Fitch Ratings has reviewed Lehman Brothers Holdings Inc.'s (LBHI) and subsidiaries' counterparty exposure in European RMBS transactions, following its downgrade of LBHI Long- and Short-term Issuer Default Ratings (IDRs) to 'D' on its declaration of bankruptcy. A full-text copy of the transactions affected and their type of exposure is available for free at: http://ResearchArchives.com/t/s?3266 Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, '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. ----------------------------------------------------------------- [00139] MOODY'S RATES CREDIT DERIVATIVE DEALS EXPOSED TO LEHMAN - ---------------------------------------------------------------- New York, September 18, 2008 -- Moody's Investors Service announced that is has placed its ratings of certain U.S. credit derivative transactions (the "Transactions") that have exposure to Lehman Brothers Holdings Inc. ("LBHI") and certain UK Lehman companies, including Lehman Brothers International (Europe) ("LB- UK" and collectively with LBHI, the "LBHI Entities"), on watch for possible downgrade. Moody's explained that its rating action is based upon LBHI seeking protection under Chapter 11 of the U.S. Bankruptcy Code and LB-UK being placed into administration, a procedure governed by the Insolvency Act of 1986, on September 15, 2008. The exposure of the Transactions to LBHI Entities arises from various roles performed by them in the Transactions, including (without limitation): -- counterparty under interest rate, currency, and coupon swaps -- counterparty under credit default swaps -- guarantor Moody's ratings of these transactions have been placed on review for possible downgrade,a detailed list of which can be accessed for free at: http://ResearchArchives.com/t/s?3267 Pursuant to a press release dated September 17, 2008, Moody's ratings on certain credit derivative transactions have been placed on review for possible downgrade, a full-text copy of which can be accessed for free at: http://ResearchArchives.com/t/s?326e ----------------------------------------------------------------- [00140] MOODY'S PUTS RMBS AND ABS DEALS WITH LEHMAN ON DOWNGRADE ----------------------------------------------------------------- New York -- September 17, 2008 -- On 15 September 2008, Lehman Brothers Holdings Inc ("LBHI") announced that it intends to file a petition under Chapter 11 of the U.S. Bankruptcy Code. Also, on 15 September, Moody's Investors Service downgraded the senior ratings of LBHI, and those of certain guaranteed subsidiaries, to B3 under Review for further downgrade from A2. As a result of Lehman's bankruptcy and rating downgrade, Moody's has today placed these RMBS and ABS ratings on review for possible downgrade, a detailed list of which can be accessed at: http://ResearchArchives.com/t/s?326c In a subsequent press release dated September 18, 2008, Moody's announced that certain Lehman small business deals were taken off review as these deals do not have exposure to Lehman counterparty risk. A full-text copy of the small business deals which have been taken out of review from possible downgrade due to Lehman Exposure can be accessed at: http://ResearchArchives.com/t/s?326b ----------------------------------------------------------------- [00141] MOODY'S SETS 13 MARKET MONEY FUNDS' RATINGS UNDER REVIEW ----------------------------------------------------------------- New York, September 18, 2008 -- Moody's Investors Service placed today on review for possible downgrade thirteen Aaa and Aaa/MR1+-rated money market funds and one bond fund rated Aaa that are sponsored and managed by Lehman Brothers Asset Management (LBAM), an indirect subsidiary of Lehman Brothers Holdings Inc. ("LBHI"), which filed for bankruptcy on September 15, 2008 under Chapter 11 of the U.S. Bankruptcy Code. Moody's cited three main reasons for its review: (1) Liquidity and prospective operational concerns related to the ability of LBAM-sponsored funds to sustain increasing levels of redemptions by their shareholders during these extreme market conditions; (2) Potential for reduced support available to the funds prospectively, given the LBHI bankruptcy; and (3) Elevated uncertainty associated with the potential change in LBAM's ownership and structure, particularly in the context of current market instability. Moody's reviews for downgrade will focus on the pace of redemptions at each of the identified funds; the robustness of liquidity plans that would address key areas of concern; and the potential for a sale of LBAM to another highly-rated or adequately capitalized fund sponsor which could serve to address the current situation. The following U.S. domiciled and offshore money-market fund ratings as well as one bond fund rating were placed on review for possible downgrade: -- Neuberger Berman Prime Money Fund -- Aaa -- Lehman Brothers Institutional Liquidity Funds -- Government Reserves Portfolio -- Aaa -- Lehman Brothers Prime MMF - Aaa -- Lehman Brothers Sterling Liquidity Fund -- Aaa -- Lehman Brothers Institutional Liquidity Funds - Prime Portfolio - Aaa -- Lehman Brothers Institutional Liquidity Funds -- Government Portfolio -- Lehman Brothers National Municipal Money Fund - Aaa -- Lehman Brothers Institutional Liquidity Funds -- Treasury Portfolio - Aaa -- Lehman Brothers Tax Free Money Fund - Aaa -- Lehman Brothers Prime Reserve Fund -- Aaa -- Lehman Brothers Euro Liquidity Fund -- Aaa -- Lehman Brothers US Dollar Liquidity Fund --Aaa -- Lehman Brothers Institutional Liquidity Funds -- Treasury Reserves Portfolio - Aaa -- Lehman Brothers Enhanced LIBOR Fund -- Aaa/MR3 on review for possible downgrade Lehman Brothers Asset Management, an indirect wholly owned subsidiary of Lehman Brothers Holdings, Inc. which is not subject to the bankruptcy proceedings of the parent, offers investment management services to institutional clients, including via sponsorship and management of money market and fixed income funds. While these money market and bond funds are managed by Lehman Brothers Asset Management, their assets are maintained for the exclusive benefit of the funds in segregated custody accounts maintained by State Street Bank and Trust Company and The Bank of New York. ----------------------------------------------------------------- [00142] MOODY'S DOWNGRADES TRANSACTIONS EXPOSED TO LEHMAN ----------------------------------------------------------------- New York -- September 18, 2008 -- Moody's Investors Service announced that is has downgraded and left under review for further possible downgrade its ratings of certain credit derivative transactions (the "Transactions") that have exposure to Lehman Brothers Holdings Inc. ("LBHI"). Moody's explained that its rating action is based upon the recent downgrade of Moody's rating of LBHI from A1 to B3 on watch for possible downgrade. LBHI is the obligor of the underlying obligations held by the Transactions, and accordingly each transaction has a direct pass-through exposure of the credit risk of LBHI. A detailed list of transactions for possible downgrade can be accessed at: http://ResearchArchives.com/t/s?3274 ----------------------------------------------------------------- [00143] MOODY'S PLACES 40 EUROPEAN RMBS' RATINGS FOR DOWNGRADE ----------------------------------------------------------------- London -- September 17, 2008 -- On 15 September 2008, Lehman Brothers Holdings Inc ("LBHI") announced that it intends to file a petition under Chapter 11 of the U.S. Bankruptcy Code. Also, on 15 September, Moody's Investors Service downgraded the senior ratings of LBHI, and those of certain guaranteed subsidiaries, to B3 under Review for further downgrade from A2. The short-term ratings for all rated LBHI entities were lowered to Not-Prime from Prime-1. As a result of LBHI's bankruptcy and rating downgrade, Moody's has placed 40 EMEA RMBS ratings on review for downgrade, a full-text of which can be accessed at: http://ResearchArchives.com/t/s?326d ----------------------------------------------------------------- [00144] MOODY'S REVIEWS 8 EMEA ABS DEALS'RATINGS FOR DOWNGRADE ----------------------------------------------------------------- Frankfurt -- September 17, 2008 -- On 15 September 2008, Lehman Brothers Holdings Inc ("LBHI") announced that it intends to file a petition under Chapter 11 of the U.S. Bankruptcy Code. Also, on 15 September, Moody's Investors Service downgraded the senior ratings of LBHI, and those of certain guaranteed subsidiaries, to B3 under review for further downgrade from A2. The short-term ratings for all rated Lehman entities were lowered to Not-Prime from Prime-1. As a result of LBHI's bankruptcy and rating downgrade, Moody's has today placed the following EMEA ABS ratings on review for possible downgrade, a copy of which can be accessed for free at:http://ResearchArchives.com/t/s?326f ----------------------------------------------------------------- [00145] MOODY'S PUTS 3 JAPANESE CMBS DEALS' RATINGS FOR DOWNGRADE ----------------------------------------------------------------- Tokyo -- September 17, 2008 -- On 15 September 2008, Lehman Brothers Holdings Inc ("LBHI") announced that it intends to file a petition under Chapter 11 of the U.S. Bankruptcy Code. Also, on 15 September, Moody's Investors Service downgraded the senior ratings of LBHI, and those of certain guaranteed subsidiaries, to B3 under Review for further downgrade from A2. The short-term ratings for all rated Lehman entities were lowered to Not-Prime from Prime-1. As a result of Lehman's bankruptcy and rating downgrade, Moody's has today placed the following Japanese CMBS ratings on review for downgrade, a full-text copy of which is available for free at: http://ResearchArchives.com/t/s?3270 ----------------------------------------------------------------- [00146] MOODY'S REVIEWS LEHMAN'S BANKRUPTCY IMPACT ON RATINGS ----------------------------------------------------------------- New York -- September 16, 2008 -- Moody's rates numerous utilities, independent power companies, and project financings where Lehman's reduced ability to satisfy existing or future financial obligations as a counterparty may have a negative effect on ratings. Lehman's participation as a provider of, or participant in, various types of credit facilities, as an off- taker in power purchase agreements, or as a shipper in natural gas shipping agreements may result in increased risk in these transactions. "Moody's is currently gathering appropriate information in order to determine the total extent of Lehman's exposure as either a counterparty or credit provider in order to gauge credit impact for potentially effected rated entities," said Bart Oosterveld, Group Credit Officer for Moody's Global Project and Infrastructure Group. Lehman filed for bankruptcy on September 15, 2008. The holding company acts as the ultimate guarantor for the obligations of Lehman Brothers Commodity Services, Inc., which is the direct counterparty for many infrastructure and project finance issuers. Lehman Brothers Commodity Services, Inc. has, to-date, not filed for bankruptcy and we understand that it has been honoring its commercial and financial obligations. The holding company bankruptcy filing however constitutes a technical default under the guaranty which is likely to give any counterparty the contractual right to terminate the relevant agreement. To the extent that individual company or project finance outliers surface during this review, Moody's will take appropriate rating actions to reflect the credit impact on rated infrastructure issuers. It should be noted that highly leveraged project finance or infrastructure companies are usually aware of the risk of default or downgrade of even highly rated counterparties. To mitigate this risk, those companies may limit their exposure to a single credit counterparty and have access to short term liquidity such as debt service reserve accounts that are available to cushion any default impact until replacement arrangements can be implemented. We anticipate determining whether specific outliers exist within the next few days after additional information is gathered and analyzed. ----------------------------------------------------------------- [00147] MOODY'S PUTS LEHMAN 2007-LLF C5'S RATINGS FOR DOWNGRADE ----------------------------------------------------------------- New York -- September 16, 2008 -- Moody's Investors Service placed two pooled classes and eleven rake classes of Lehman Brothers Floating Rate Commercial Mortgage Trust Series 2007-LLF C5 on review for possible downgrade as follows: -- Class H, $51,761,000, currently rated Baa2; -- Class J, $57,513,000, currently rated Baa3; -- Class JHC, $7,500,000, currently rated Baa3; -- Class SFO-1, $9,400,000, currently rated A2; -- Class SFO-2, $7,500,000, currently rated A3; -- Class SFO-3, $7,400,000, currently rated Baa1; -- Class SFO-4, $8,800,000, currently rated Baa2; -- Class SFO-5, $8,600,000, currently rated Baa3; -- Class CGC, $6,210,000, currently rated Baa3; -- Class CPE, $4,000,000, currently rated Baa3; -- Class HSS, $3,100,000, currently rated Baa3; -- Class HAR-1, $2,600,000, currently rated Baa2; -- Class HAR-2, $2,400,000, currently rated Baa3; Moody's is placing Classes H, J, JHC, SFO-1, SFO-2, SFO-3, SFO-4, SFO-5, CGC, CPE, HSS, HAR-1, and HAR-2 on review for possible downgrade due to the uncertainty surrounding the future funding obligations of Lehman Brothers Holdings Inc. ("LBHI"). On September 15, 2008 Lehman Brothers Holdings Inc. ("LBHI") announced that it intends to file a petition under Chapter 11 of the U.S. Bankruptcy Code. Also, on September 15, Moody's Investors Service downgraded the senior ratings of LBHI, and those of certain guaranteed subsidiaries, to B3 under Review for further downgrade from A2. The short-term ratings for all rated Lehman entities were lowered to Not-Prime from Prime-1. Moody's review will focus on the degree of exposure that this transaction has to LBHI or its subsidiaries and the impact of the bankruptcy filing on the future funding obligations as they impact the performance of the underlying assets. Pooled Classes H and J are secured by 38 senior participation interests in whole loans totaling $2.1 billion. Non-pooled Classes JHC, SFO-1, SFO-2, SFO-3, SFO-4, SFO-5, CGC, CPE, HSS, HAR-1, and HAR-2 are secured by the trust junior portion of loans backed by John Hancock Center, the San Francisco Office Portfolio, Citigroup Center, 1888 Century Park East, Hyatt Summerfield Suites, and the Hyatt Arlington. ----------------------------------------------------------------- [00148] MOODY'S PUTS LEHMAN BROTHERS DERIVATIVE PRODUCTS ON WATCH ----------------------------------------------------------------- New York -- September 16, 2008 -- Moody's Investors Service announced today that it has put the Counterparty Rating of Lehman Brothers Derivative Products Inc. ("LBDP") on watch for possible downgrade. According to Moody's, the rating action is the result of the operational risk in administering LBDP's termination as a derivative products company. The bankruptcy filing of Lehman Brothers Holdings Inc. has caused a trigger event for LBDP, which as a termination vehicle requires LBDP to unwind its portfolio. The last rating action was taken on October 1, 2001 when the Aaa rating of LBDP was confirmed. Moody's derivative products company rating methodology was applied in this rating action. ----------------------------------------------------------------- [00149] S&P LOWERS RATINGS ON 8 ASIA-PACIFIC CDO, 42 UNDER WATCH ----------------------------------------------------------------- MELBOURNE -- September 18, 2008 -- Standard & Poor's Ratings Services lowered the ratings on eight Asia-Pacific Synthetic CDOs and placed 42 Synthetic CDOs on CreditWatch with negative implications after the downgrade of Lehman Bros. Holdings Inc. (D/--/D) on Sept. 16, 2008. The eight transactions listed in Table 1 are supported by the ratings of the underlying bonds either issued by Lehman Brothers Treasury Co. B.V. (D) and guaranteed by Lehman Bros. Holdings Inc. or issued by Lehman Bros. Holdings Inc. The rating actions taken on the affected transactions are as follows: Deal Name Rating To Rating From --------- --------- ----------- Beryl Finance Ltd. Series 2005-10 D BBB- Beryl Finance Ltd. Series 2005-11 D BBB- Beryl Finance Ltd. Series 2005-12 D BBB Beryl Finance Ltd. Series 2005-15 D BBB/Watch Neg Beryl Finance Ltd. Series 2007-8 D ApNRi/Watch Neg Beryl Finance Ltd. Series 2007-11 D ApNRi/Watch Neg Diadem City CDO Ltd. Series 2008-2 D ApNRi/Watch Neg Zircon Finance Ltd. Series 2007-17 D A-pNRi The CreditWatch negative placements on 42 transactions follow the trigger of a downgrade provision relating to a swap counterparty guaranteed by Lehman Bros. Holdings Inc. under the transaction documents. Among the 42 transactions, seven of them have already been placed on CreditWatch with negative implications and remain on the list. Standard & Poor's will update or resolve the CreditWatch placements following the replacement of the swap counterparty, or the consequence of a possible termination of the transaction. Rating Rating Deal Name to from --------- ------ ------ Aquamarine Finance PLC Series 2004-1 AAA/Watch Neg AAA Beryl Finance Ltd. Series 2005-2 BB-/Watch Ne BB- Beryl Finance Ltd. Series 2005-14 BBB/Watch Neg BBB/ Watch Neg Beryl Finance Ltd. Series 2007-7 AAA/Watch Neg AAA Beryl Finance Ltd. Series 2007-10 AAA/Watch Neg AAA Beryl Finance Ltd. Series 2007-13 AAp NRi/Watch Aap Nr Neg Beryl Finance Ltd. Series 2007-16 A+p NRi/Watch A+p NRi Class A Neg Beryl Finance Ltd. Series 2007-16 Ap NRi/Watch Ap NRi Class B Neg Beryl Finance Ltd. Series 2007-17 AAp NRi/Watch Neg AAp NRi Beryl Finance Ltd. Series 2007-18 AAp NRi/Watch Aap NRi Neg Beryl Finance Ltd. Series 2008-4 AAAp NRi/Watch AAAp NRi Neg Beryl Finance Ltd. Series 2008-5 AAA/Watch Neg AAA Beryl Finance Ltd. Series 2008-6 AA-p NRi/Watch Neg AA-p NRi Beryl Finance Ltd. Series 2008-8 AAA/Watch Neg AAA Beryl Finance Ltd. Series 2008-9 AAA/Watch Neg AAA Beryl Finance Ltd. Series 2008-10 AAA/Watch Neg AAA Beryl Finance Ltd. Series 2008-14 AA-p NRi/Watch AA-p Nri Neg Diadem City CDO Ltd. Series 2008-3 AAp NRi/Watch AAp NRi Neg Lion City CDO Ltd. Series 2006-1 AA/Watch Neg AA Lion City CDO Ltd. Series 2006-2 AA/Watch Neg AA/Watch Neg Lion City CDO Ltd. Series 2006-3 AA/Watch Neg AA/Watch Neg Lion City CDO Ltd. Series 2006-5 AAA/Watch Neg AAA/Watch Neg Onyx Funding Ltd. Series 2005-1 BBB+/Watch Neg BBB+ Onyx Funding Ltd. Series 2006-1 A+/Watch Neg A+/Watch Neg Saphir Finance PLC Series 2004-4 AAA/Watch Neg AAA Saphir Finance PLC Series 2004-7 AAA/Watch Neg AAA Saphir Finance PLC Series 2004-11 A-/Watch Neg A- Saphir Finance PLC Series 2004-12 AA/Watch Neg AA Saphir Finance PLC Series 2006-5* BBB-p NRi/ BBB-p Watch Neg Nri/Watch Neg Saphir Finance PLC Series 2008-6 AAA/Watch Neg AAA Saphir Finance PLC Series 2008-7 AAA/Watch Neg AAA Saphir Finance PLC Series 2008-8 AA+/Watch Neg AA+ Saphir Finance PLC Series 2008-9 AA/Watch Neg AA Saphir Finance PLC Series 2008-10 AA/Watch Neg AA Saphir Finance PLC Series 2008-11 AA/Watch Neg AA Saphir Finance PLC Series 2008-12 AA/Watch Neg AA Saphir Finance PLC Series 2008-13 AAA/Watch Neg AAA Zircon Finance Ltd. Series 2007-8 BBB/Watch Neg BBB Zircon Finance Ltd. Series 2007-10 BB/Watch Neg BB Zircon Finance Ltd. Series 2007-14 BBB+p NRi/ BBB+p Nri Watch Neg Mahogany Capital Ltd. Series I A-/Watch Neg A- Mahogany Capital Ltd. Series II* BBB-p NRi/ BBB-p Watch Neg Nri/Watch Neg Mahogany Capital Ltd. Series II is a repack of the Saphir Finance PLC Series 2006-5 notes. The interest payment to noteholders due on Sept. 17, 2008 was not met as interest was not received from Saphir Finance PLC Series 2006-5. Ratings on these two transactions only address principal payments. Interest payments are not rated, as indicated by the "NRi" extension. Ratings are statements of opinion, not statements of fact or recommendations to buy, hold, or sell any securities. Standard & Poor's (Australia) Pty. Ltd. does not hold an Australian financial services license under the Corporations Act 2001. Any rating and the information contained in any research report published by Standard & Poor's is of a general nature. It has been prepared without taking into account any recipient's particular financial needs, circumstances, and objectives. Therefore, a recipient should assess the appropriateness of such information to it before making an investment decision based on this information. *** End of Issue No. 5 ***