Lehman, WCAS Fraser Sullivan Make Deal On $5.3 Billion Loan Portfolio

   By Eric Morath 
   Of DOW JONES DAILY BANKRUPTCY REVIEW 
 

Lehman Brothers Holdings Inc. (LEHMQ) struck a deal with WCAS Fraser Sullivan Investment Management LLC that will allow the failed investment bank to turn its $5.3 billion commercial-loan portfolio into cash.

The deal, filed with the U.S. Bankruptcy Court in Manhattan Wednesday afternoon, allows Lehman to more quickly monetize one of its largest assets, its commercial-loan portfolio, rather than selling the loans at depressed prices or waiting for them to mature. Some 30% of those loans don't mature until 2016 or later.

Lehman reached an asset-management agreement with Fraser Sullivan Tuesday that calls for the firm to assist in transferring part of the portfolio to collateralized loan obligations, or CLOs, and manage the remaining portion of the portfolio that is not eligible to be included in such securitizations, court papers said.

The proposal, which is subject to court approval, would bring between $1.6 billion and $2.0 billion in cash into the Lehman estate following the sale of securities by the CLO issuers.

"This is a great outcome for the estate," said Doug Lambert, chief executive of Lamco, the asset-management unit Lehman spun out of its bankruptcy case.

"Not only does this agreement with Fraser Sullivan ensure maximization of recovery value from our loan portfolio over the long term, but it also provides continuity of management who are aligned with the estate's mission to deliver that value back to creditors," he said in an email.

Lambert is also a managing director with restructuring advisor Alvarez & Marsal.

According to court papers, certain employees of Lamco, who had been overseeing the commercial portfolio, will move to Fraser Sullivan.

A hearing on the matter is set for Aug. 17.

The commercial portfolio includes loans from 157 issuers with an outstanding principal balance of $3.8 billion and unfunded commitments of about $1.5 billion.

(Dow Jones Daily Bankruptcy Review covers news about distressed companies and those under bankruptcy protection.)

-By Eric Morath, Dow Jones Daily Bankruptcy Review; 202-862-9279; [e-mail]