does anybody know how it would work under chapter 7? I guess they would not throw everything into the market, right? I mean, the court (or whoever rules this) will try to find buyers (such as HFs, PE firms, etc)… if they throw those assets into the market and prices go down substantially I can not even imagine the write downs it would trigger for other firms if they mark to market their same assets… any idea? thx
that is the whole point of a liquidation – its gonna be “orderly”
They would never file Chapter 7 because that essentially puts the disposal of assets out of their control. If they do file for Chapter 7 it would be a huge FU to Treasury, the Fed, other banks, everyone…
leh has no choice any more - it is not like they have any more bargaining chips … .the government will force the chapter 7 to ensure an orderly market unwind of the bulk of the liquid trades with other counterparties … now what is the impact of the toxic CMBS on the market will take its effect over this coming week …
OK, how can the gov’t force a Chapter 7 filing? This isn’t exactly my specialty but I think only a bankruptcy judge can force a Chapter 7.
leh’s lawyers are already ready to file chapter 7 at 11:59pm tonight; the judge only gets involved when all parties dont play nice…
A B/D can’t file chap 11: “A broker-dealer is not eligible to reorganize under chapter 11 of the Bankruptcy Code. A broker-dealer insolvency will instead lead either to a distressed sale, as in the case of Bear Stearns, or to a liquidation proceeding. A liquidation pro¬ceeding can be carried out either under chapter 7 of the Bankruptcy Code, which has special provisions that apply to stockbroker liquidations, or under the provisions of the Securities Investor Protection Act (“SIPA”). The commencement of a SIPA liquidation by the Securities Investor Protection Corporation (“SIPC”) essentially supersedes a stockbroker liq¬uidation commenced under the Bankruptcy Code. Because almost all broker-dealers registered with the SEC are members of SIPC, many broker-dealer liquidations are conducted pursuant to SIPA rather than the Bankruptcy Code.” However, dealbreaker is reporting several parts of the firm will file 11 and only the b/d will go 7.
What happens to employees under chapter 11? I know under chapter 7, it’s all over.
JoeyDVivre Wrote: ------------------------------------------------------- > OK, how can the gov’t force a Chapter 7 filing? > This isn’t exactly my specialty but I think only a > bankruptcy judge can force a Chapter 7. ch7 can be voluntary or involuntary. unless the govt is a creditor, and its debts are not being repaid as they come due, it cannot force ch7 filing. LEH will voluntarily file ch7 - and that will trigger an automatic order for relief from creditors. a trustee will be appointed by the judge. the debtor (existing shareholders) will stand aside, and the trustee will run the debtor’s estate in liquidation. the trustee will conduct an orderly liquidation of LEH’s assets and distribute in order of priority of claims.
under chapter 11 the aim is to salvage and restructure the company … hence more employees are more likely to keep their jobs.
sid3699 Wrote: ------------------------------------------------------- > What happens to employees under chapter 11? > > I know under chapter 7, it’s all over. under ch11, it depends on the DIP’s (lehman’s current shareholders) operating decisions while it reorganizes. if you’re an employee of the legal entities that are filing ch11, you may well stay employed until the company is reorganized. under ch7, unless the employee will help maximize the value of the estate’s assets, he is just reducing the value of the distributable assets, so will likely be cut off ASAP. any employment contracts are toast in ch11/ch7, subject to some timing details i don’t recall now. also, if you have unpaid wages, you’re an unsecured creditor, btw. when was the last LEH payroll? someone who is active in the distressed arena can correct me if i got something wrong.