Lehman announces exit from bankruptcy

Nearly three-and-a-half years after it went belly-up in September 2008, the once-powerful investment bank Lehman Brothers has announced its exit from bankruptcy.

A Wall Street behemoth at that time, Lehman’s bankruptcy had become a symbol of global financial crisis at that time, and its ripple effects led to the world markets, including in India, falling like nine pins for months together.

The world economy is still far from a complete recovery, as Europe is engulfed in a major debt crisis, but the US-based financial services firm last night asserted its return to sound financial health.

However, it could still take many years before the 161-year-old Lehman, once a poster-boy of the US markets, regains its lost glory.

The Indian stock market and many others have recovered ground lost since September 2008, but they are yet to regain their lost glory, as a downslide had been underway for months before Lehman went bankrupt.

The Indian market’s barometer Sensex nearly halved from over 15,000-levels to close at 8,500 points within weeks of the Lehman bankruptcy in September 2008, but is again trading near 17,000 levels. However, it is still well short of its record high levels of over 21,000 points, scaled in January 2008.

Lehman Brothers remains the biggest bankruptcy in world history, as it had gone belly-up with an asset size of over $690 billion — over double the size of the second-largest case of Washington Mutual at about $320 billion.

The exit from bankruptcy is estimated to cost the defunct bank more than $1.5 billion in terms of various fees and expenses. This is nearly double the bankruptcy exit bill of Enron at about $800 million.

As part of the restructuring efforts, Lehman Brothers has sold off many of its assets since entering into bankruptcy, and after this exit, such sell-off will not require court permission for every asset sale.

Under its bankruptcy-exit plan, Lehman would start paying back its creditors by the middle of next month.

“We are proud to announce Lehman’s exit from chapter 11 and entrance into the final stage of this process — distributions to creditors,” Mr John Suckow, a Managing Director with Alvarez & Marsal and Lehman’s President and Chief Operating Officer, said.

A new board will guide Lehman Brothers Holdings and its affiliates towards a “complete liquidation” of their assets, following a strategy to efficiently and expeditiously maximise results for creditors, the statement said.

“Our objective remains to provide the best results possible for creditors — by continuing to strategically position assets to produce strong values, to pursue the resolution of disputed claims and other matters in litigation, and to manage expenses in line with the asset disposition process,” Mr Suckow added.

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