Nine months after it filed for bankruptcy protection and sold its brokerage to Barclays, Lehman Brothers Holdings is still fighting with the British bank over who owns what, including the investment bank’s own furniture.
Lehman, once the fourth-largest investment bank, asked a bankruptcy judge in New York last week to let it pay Barclays $5.9 million to buy back desks, chairs, tables, cubicles, audio- video equipment and security paraphernalia it currently uses in a building at 1271 Avenue of the Americas in Manhattan.
The repurchase is necessary because “Barclays has asserted that certain of the office furniture, fixtures and equipment that is located in the building and used by the debtors was previously sold to Barclays,” Lehman said in a June 4 filing in US Bankruptcy Court in New York.
The New York-based investment bank’s disputes with Barclays have ranged from whether the liabilities assumed by Barclays were less than what the parties assumed in setting the purchase price, to who owns Lehman-logoed umbrellas.
Lehman, which filed the biggest bankruptcy in US history in September with assets of $639 billion, is trying to cut its overhead including lease costs as it liquidates. Its landlord has agreed to cut Lehman’s rent by $305 million to $21 million on an existing lease, partly in exchange for getting the furniture, according to the filing. Lehman first has to buy it back from Barclays, the third-biggest UK bank by assets.
The lease will be shortened and Lehman will rent less space under the proposed arrangement, a court filing shows.
Peter Truell, a Barclays spokesman, declined to comment, as did Kimberly Macleod, a Lehman spokeswoman.
Windfall profit?
Last month, Lehman, which has an estimated $200 billion in unsecured liabilities left to pay, asked the bankruptcy judge to investigate whether Barclays made a windfall profit when it bought Lehman’s brokerage unit and real estate for $1.54 billion just days after the securities firm filed for bankruptcy.
The firm “has become aware of apparent material discrepancies relating to the liabilities Barclays was to assume,” Lehman said in a May 18 court filing. “These apparent discrepancies may have resulted in a windfall to Barclays at the expense of the estate, its creditors and other parties in interest, in an amount that could reach billions of dollars.”
As part of the acquisition, Barclays received almost $4 billion in securities and cash from Lehman to pay liabilities such as equipment leases, severance and bonuses, said a person familiar with the matter who declined to be named. Later, when Barclays announced its financial results for 2008, the bank said it recorded a gain of £2.26 billion ($3.75 billion) from the acquisition of Lehman’s North American operations, according to the court filing.
Lehman’s liabilities
The bank may have paid only some of Lehman’s liabilities that it undertook to pay, or the liabilities may have been smaller than originally estimated, the person said. If so, Lehman wants its money back, the person said.
Lehman Chief Executive Officer Bryan Marsal wrote to Barclays in March, asking the bank to explain how it made a profit on the purchase.
Lehman must pay for the furniture “within three business days” of court approval of the purchase, and Barclays afterward “shall have no obligation to repair or restore” any of the items, according to a June 4 Barclays letter filed in court.
