Bloomberg News

Lehman Italian Real Estate May Reap $160 Million Gain

October 17, 2011

(Updates with Italian buildings in second paragraph.)

Oct. 17 (Bloomberg) -- Lehman Brothers Holdings Inc.’s Italian real-estate fund could make “an immediate substantial gain” after a restructuring that released 116 million euros ($159.5 million) of blocked assets, Lehman creditors said.

The defunct firm’s commercial-paper unit has stakes in 14 office buildings and 20 Telecom Italia SpA switching stations in Rome, Milan and other Italian cities as a result of loans made in 2007, according to court documents. Restructuring the loans and converting some of them to equity would let the unit, Lehman Commercial Paper Inc., get its money back in two to three years, the creditors committee said in an Oct. 14 filing in U.S. Bankruptcy Court in Manhattan.

Lehman, which is gathering support for a $65 billion liquidation plan ahead of a November vote, is trying to sell and restructure real estate interests taken on before its 2008 collapse. Last week, it said it would take title to the Ritz- Carlton Kapalua after foreclosing on its $232.4 million loan in 2007 for a resort in Hawaii.

The commercial-paper unit managed to syndicate 50 million euros of its Italian real estate loans in 2007, Lehman has said. The unit retained 278 million euros of debt that was due to be paid in September, it said in a filing last month.

Lehman values its real estate at $13.2 billion. Asset sales will run through 2014, New York-based Lehman said in a June filing.

Fuld Request

Separately today, ex-Chairman Richard Fuld and other former executives of what was once the fourth-largest investment bank asked the judge handling Lehman’s bankruptcy to modify a law so they can draw about $1 million more under the company’s directors-and-officers insurance policies to settle six lawsuits by California municipalities, according to a court filing. Lehman executives said in August that they would settle an investor lawsuit for $90 million.

Lehman has used up most of its so-called D&O coverage of $250 million. Last week it asked the judge if it could tap the insurers again to settle an arbitration proceeding with GameTech International Inc. over securities-law violations.

Lehman failed because of risky real estate investments and too much debt, which it tried to hide from investors, according to a bankruptcy examiner.

Lehman’s creditors range from Goldman Sachs Group Inc. to the New York Giants and Abu Dhabi Investment Authority, as well as individuals who hold Lehman bonds. Lehman filed for bankruptcy on Sept. 15, 2008, with assets of $639 billion.

The case is In re Lehman Brothers Holdings Inc., 08-13555, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

--Editors: Andrew Dunn, Peter Blumberg

To contact the reporter on this story: Linda Sandler in New York at lsandler@bloomberg.net

To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net


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