Friday, December 17, 2010
San Mateo County Lehman recovery update
The Daily Journal 12/16/10. San Mateo County is joining 10 other creditors like hedge fund Paulson & Co. and the California Public Employees’ Retirement System in proposing an alternative way of distributing the $57.5 billion in assets. Rather than accept Lehman’s plan to the bankruptcy court which apportions creditors varying amounts of pennies on the dollar, an ad hoc group whose members have similar investments filed a rival reorganization plan with the U.S. Bankruptcy Court in New York.
San Mateo County’s expected payout would be 17.4 cents on the dollar, Beiers said. According to Beiers, the issue is definitely financial but also one of principal. “The county considered Lehman to be one business entity when the treasurer invested in it, not a specific subset. We feel we have a compelling argument to the court,” Beiers said. In comparison to that plan, yesterday’s filing would give all Lehman creditors 24.5 cents on the dollar. Lehman’s right to an exclusive plan expired after 18 months, opening the way for alternatives. Lehman may also file a modified plan in the future with tweaked figures.
San Mateo County lost $155 million from its investment pool when the Wall Street titan failed more than two years ago, sparking the largest bankruptcy in U.S. history and numerous failed attempts to make financially wounded jurisdictions whole. The county investment pool includes 1,050 different accounts from cities, school districts and special agencies. Of that, $20 million came from school districts who have since sued San Mateo County, more than $1 million from Peninsula cities and $25 million from the San Mateo County Transportation Authority. San Mateo County went one step beyond bankruptcy court to recoup its losses, suing the company’s individual executives and accountants, too. While those effort are ongoing, according to county spokesman Marshall Wilson, they have yet to come to fruition. Also stalled are pushes by congressional leaders like U.S. Reps. , D-San Mateo, and Anna Eshoo, D-Palo Alto, to treat the affected counties, cities and agencies like banking creditors who’ve since been helped by the federal government. Likewise, the rival distribution plan’s proponents say Lehman’s own plan treats the large banks better than the smaller victims and could cause more litigation as the different entities fight over the assets. “It’s a double insult that the large banks who definitely stand to benefit from the plan have already benefited from taxpayers,” Beiers said, referring to past bailouts. There is no guarantee the bankruptcy court will accept either plan and Beiers said there is hope that the recovery could be even higher than the suggested 24.5 cents per dollar.Lehman has told the court it hopes for the bankruptcy to be completed sometime in 2011 but now everyone involved must just wait, Beiers said.
Posted by Kathy Meeh