The Daily Journal 12/16/10. San Mateo County
is joining 10 other
Lehman Brothers 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.
The group is collectively owed
nearly $12.5 billion from Lehman’s holding company and entities
but would recover much less under Lehman’s plan than its own.
“Their plan makes no sense at all,” said Chief Deputy County
Counsel John Beiers. “When you look at it, it’s kind of shocking
that they’re treating all these creditors differently.” Lehman has
several entities under its umbrella and the plan aims to pay
investors based on which section it was involved. Opponents say
the structure would give larger investors like banks more while
leaving others, like San Mateo County, getting less. Lehman’s plan
offers
unsecured creditors 10.4 cents to 44.2 cents on the dollar.
General unsecured creditors would recover 14.7 cents on the dollar
while creditors of the derivatives and commercial paper units
would recover 21.9 percent to 44.2 cents on the dollar.
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.
Jackie Speier, 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