“Key” money managers at Lehman Brothers Holdings Inc will get retention bonuses valued at $400 million when their investment-management business is sold to Bain Capital LLC and Hellman & Friedman LLC.
Bain and Hellman on September 29 agreed to buy most of the asset-management unit from bankrupt Lehman in a deal that values business at $2.15 billion, about half the buyout firms’ initial bids. The purchasers will deduct the employee awards from the amount they pay the investment bank for the assets, Lehman’s lawyers said yesterday in a court filing.
Under the proposed arrangement, which a US bankruptcy judge must approve, Lehman employees and portfolio managers will get 16.8 per cent of the equity in the purchased assets. The awards are valued using the “gross purchase price” of $2.15 billion, which includes assumption of liabilities, according to the filing.
Lehman was the fourth-largest investment bank before it filed for bankruptcy September 15. Lehman Chief Executive Officer Richard Fuld bought Neuberger Berman in 2003 for $3.2 billion to expand the firm’s wealth-management business and later consolidated its asset-management operations into a single division. He had hoped to hold onto a stake in the unit as part of his failed plan to keep the 158-year-old firm afloat.
Yesterday, Fuld became a surrogate for Wall Street’s calamities in the first of a series of congressional hearings into the credit crisis and mortgage-market meltdown. Lawmakers peppered him for two hours with queries about excessive Wall Street pay and his failure to acknowledge the firm’s financial woes until it was too late.
Neuberger: One of the key executives is Joseph V Amato, Lehman’s global head of asset management, who oversees $273 billion in client assets.
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Roy Neuberger and Robert Berman founded the company named after them in 1939 to serve wealthy clients. During the 1950s, it was among the first firms to offer customers mutual funds that didn’t charge transaction fees. Neuberger, now 105, retired before the 1987 stock market crash. The firm manages about $130 billion, out of $230 billion of assets being acquired in the deal.
As equal partners, the buyout firms Bain and Hellman will get the Neuberger Berman mutual-fund division as well as part of a private-equity group that invests in corporate takeovers and real estate, the companies said last month in a statement.
Bain, based in Boston, and Hellman of San Francisco paid less than they initially offered separately earlier in September before teaming up. Private-equity firms were the only bidders in a rushed auction after New York-based Lehman filed for bankruptcy.
If the purchase falls through, Bain and Hellman will get a termination fee of $70 million and a reimbursement of $35 million under the proposed arrangement.
The case is In re Lehman Brothers Holdings Inc, 08-13555, US Bankruptcy Court, Southern District of New York (Manhattan).