Goldman Sachs Weighs Competing Lehman Liquidation Plan, Creditors
by David McLaughlin and Linda Sandler - Bloomberg
Goldman Sachs Group Inc. (GS) may propose a liquidation plan for bankrupt Lehman Brothers Holdings Inc. that would give it more money and compete with two rival plans for the defunct company, two creditors said.
Goldman Sachs, which owns claims against a Lehman derivatives unit, is considering proposing its own plan to pay creditors, said John Beiers, chief deputy county counsel for San Mateo County in California, and another creditor familiar with the matter. The county has joined hedge fund Paulson & Co. and other bondholders to push a plan that would pay them more than one filed by Lehman.
“This really gets under my skin because it is yet another example of big banks taking a position that adversely impacts taxpayers and Main Street,” Beiers said in a phone interview yesterday, referring to the potential plan from Goldman Sachs. San Mateo County is owed $155 million by Lehman.
Goldman Sachs, based in New York, has been buying claims of another Lehman unit and met with Lehman recently to outline its proposal, according to the other creditor, who declined to be named because the discussions were private. Lehman opposes Goldman Sachs’s challenge, the person said.
Goldman Sachs’s two biggest claims originally filed against the Lehman Brothers Special Financing unit for derivatives transactions totaled about $2.5 billion, according to claims filings. It filed duplicate claims against Lehman’s holding company based on guarantees issued by Lehman, according to the filings. Goldman Sachs actively trades Lehman claims, according to court filings.
Derivatives creditors were in line to get 38.3 cents on the dollar as Lehman liquidated, according to calculations by Paulson and other bondholders. The bondholders’ rival plan would cut that to 25.7 cents and raise the bondholders’ share to 24.5 cents.
In the next few years, Marsal aims to raise $61 billion from Lehman’s assets to pay $322 billion in claims, or an average of 18.6 cents on the dollar for each creditor, he said in January. Responding to Paulson’s challenge, Marsal said he would pay bondholders a little more than originally offered, taking something away from derivatives creditors.
Morgan Stanley (MS), Credit Suisse Group AG (CSGN), Deutsche Bank AG and Bank of America Corp. (BAC) have filed derivatives claims against the Lehman Brothers special finance unit, according to court filings.
Lehman hopes to win court approval of its payment plan by the end of the year and is negotiating with creditors on its details. Approval of the plan will be “contentious,” given the competing proposal by Paulson and other creditors, Lehman said in a court filing this week.
The Paulson group, which includes the California Public Employees’ Retirement System, or Calpers, says its plan is better for Lehman creditors. Goldman Sachs’s proposal would lead to a lower recovery for San Mateo County and other creditors of Lehman’s holding company, Beiers said.
“Now a large bank like Goldman Sachs, which has all the resources,” is looking to “rob us,” he said.
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