EX-99.2 3 dex992.htm LEHMAN BROTHERS HOLDINGS, INC. - MONTHLY OPERATING REPORT Lehman Brothers Holdings, Inc. - Monthly Operating Report

Exhibit 99.2

UNITED STATES BANKRUPTCY COURT

SOUTHERN DISTRICT OF NEW YORK

 

In re:

   

Chapter 11 Case No.

Lehman Brothers Holdings Inc., et al.,   

08-13555

Debtors.   

MONTHLY OPERATING REPORT

JUNE 2011

SCHEDULE OF CASH RECEIPTS AND DISBURSEMENTS

SCHEDULE OF PROFESSIONAL FEE AND EXPENSE DISBURSEMENTS

SCHEDULE OF HEDGING TRANSACTIONS

 

DEBTORS’ ADDRESS:

    LEHMAN BROTHERS HOLDINGS INC.
   c/o WILLIAM J. FOX
   1271 AVENUE OF THE AMERICAS
   35th FLOOR
   NEW YORK, NY 10020

DEBTORS’ ATTORNEYS:

    WEIL, GOTSHAL & MANGES LLP
   c/o HARVEY R. MILLER
   767 FIFTH AVENUE
   NEW YORK, NY 10153

REPORT PREPARER:

    LEHMAN BROTHERS HOLDINGS INC., A DEBTOR IN POSSESSION (IN THE SOUTHERN DISTRICT OF NEW YORK)

THIS OPERATING STATEMENT MUST BE SIGNED BY A REPRESENTATIVE OF THE DEBTOR

The undersigned, having reviewed the attached report and being familiar with the Debtors’ financial affairs, verifies under penalty of perjury, that the information contained therein is complete, accurate and truthful to the best of my knowledge.

 

    Lehman Brothers Holdings Inc.

Date: July 21, 2011

     By:  

/s/ William J. Fox

      William J. Fox
      Executive Vice President

Indicate if this is an amended statement by checking here:        AMENDED STATEMENT  ¨

TABLE OF CONTENTS

 

Schedule of Debtors

      3   

Lehman Brothers Holdings Inc. (“LBHI”) and Other Debtors and Other Controlled Subsidiaries

   

Basis of Presentation — Schedule of Cash Receipts and Disbursements

      4   

Schedule of Cash Receipts and Disbursements

      5   

LBHI

   

Basis of Presentation – Schedule of Professional Fee and Expense Disbursements

      9   

Schedule of Professional Fee and Expense Disbursements

      10   

LBHI

   

Quarterly Hedging Transactions Update

      11   

Schedule of Hedging Transactions as of June 30, 2011

      13   

 

2

SCHEDULE OF DEBTORS

The following entities have filed for bankruptcy in the Southern District of New York:

 

     Case No.    Date Filed  

Lead Debtor:

      

Lehman Brothers Holdings Inc. (“LBHI”)

    08-13555      9/15/2008   

Related Debtors:

      

LB 745 LLC

    08-13600      9/16/2008   

PAMI Statler Arms LLC(1)

    08-13664      9/23/2008   

Lehman Brothers Commodity Services Inc. (“LBCS”)

    08-13885      10/3/2008   

Lehman Brothers Special Financing Inc. (“LBSF”)

    08-13888      10/3/2008   

Lehman Brothers OTC Derivatives Inc. (“LOTC”)

    08-13893      10/3/2008   

Lehman Brothers Derivative Products Inc. (“LBDP”)

    08-13899      10/5/2008   

Lehman Commercial Paper Inc. (“LCPI”)

    08-13900      10/5/2008   

Lehman Brothers Commercial Corporation (“LBCC”)

    08-13901      10/5/2008   

Lehman Brothers Financial Products Inc. (“LBFP”)

    08-13902      10/5/2008   

Lehman Scottish Finance L.P.

    08-13904      10/5/2008   

CES Aviation LLC

    08-13905      10/5/2008   

CES Aviation V LLC

    08-13906      10/5/2008   

CES Aviation IX LLC

    08-13907      10/5/2008   

East Dover Limited

    08-13908      10/5/2008   

Luxembourg Residential Properties Loan Finance S.a.r.l

    09-10108      1/7/2009   

BNC Mortgage LLC

    09-10137      1/9/2009   

LB Rose Ranch LLC

    09-10560      2/9/2009   

Structured Asset Securities Corporation

    09-10558      2/9/2009   

LB 2080 Kalakaua Owners LLC

    09-12516      4/23/2009   

Merit LLC

    09-17331      12/14/2009   

LB Somerset LLC

    09-17503      12/22/2009   

LB Preferred Somerset LLC

    09-17505      12/22/2009   

 

 

(1) On May 26, 2009, a motion was filed on behalf of Lehman Brothers Holdings Inc. seeking entry of an order pursuant to Section 1112(b) of the Bankruptcy Code to dismiss the Chapter 11 Case of PAMI Statler Arms LLC, with a hearing to be held on June 24, 2009. On June 19, 2009, the motion was adjourned without a date for a continuation hearing.

The Chapter 11 cases of Fundo de Investimento Multimercado Credito Privado Navigator Investimento No Exterior (Case No: 08-13903) Lehman Brothers Finance SA (Case No: 08-13887) have been dismissed.

 

3

LEHMAN BROTHERS HOLDINGS INC. (“LBHI”) AND OTHER DEBTORS AND OTHER

CONTROLLED ENTITIES

BASIS OF PRESENTATION

SCHEDULE OF CASH RECEIPTS AND DISBURSEMENTS

JUNE 1, 2011 TO JUNE 30, 2011

The information and data included in this Monthly Operating Report (“MOR”) are derived from sources available to Lehman Brothers Holdings Inc. (“LBHI”) and its Controlled Entities (collectively, the “Company”). The term “Controlled Entities” refers to those entities that are directly or indirectly controlled by LBHI, including LAMCO LLC (“LAMCO”), and excludes, among other things, those entities that are under separate administrations in the United States or abroad, including Lehman Brothers Inc., which is the subject of proceedings under the Securities Investor Protection Act. LBHI and certain of its Controlled Entities have filed for protection under Chapter 11 of the Bankruptcy Code, and those entities are referred to herein as the “Debtors”. The Debtors’ Chapter 11 cases have been consolidated for procedural purposes only and are being jointly administered pursuant to Rule 1015(b) of the Federal Rules of Bankruptcy Procedure. The Debtors have prepared this MOR, as required by the Office of the United States Trustee, based on the information available to the Debtors at this time, but note that such information may be incomplete and may be materially deficient in certain respects. This MOR is not meant to be relied upon as a complete description of the Debtors, their business, condition (financial or otherwise), results of operations, prospects, assets or liabilities. The Debtors reserve all rights to revise this report.

 

  1.

This MOR is not prepared in accordance with U.S. generally accepted accounting principles (GAAP). This MOR should be read in conjunction with the financial statements and accompanying notes in the Company’s reports that were filed with the United States Securities and Exchange Commission.

 

  2.

This MOR is not audited and will not be subject to audit or review by the Company’s external auditors at any time in the future.

 

  3.

The beginning and ending balances include cash in demand-deposit accounts (DDA), money-market funds (MMF), treasury bills and other investments.

 

  4.

Beginning and ending cash balances are based on preliminary closing numbers and are subject to adjustment.

 

  5.

Beginning and ending cash and investment balances exclude the following:

 

  —  

Cash posted as collateral for hedging activity;

  —  

Cash related to LBHI’s wholly-owned indirect subsidiaries Aurora Bank FSB and Woodlands Commercial Bank;

  —  

Cash pledged on or prior to September 15, 2008 by the Company in connection with certain documents executed by the Company and Citigroup Inc. and HSBC Bank PLC, currently recorded at $2 billion and $235 million, respectively; and

  —  

$500 million which was seized by Bank of America (“BOA”) to offset derivatives claims against the Debtors. On November 16, 2010, the Bankruptcy Court ruled that BOA had no right to set-off these funds and must return the $500 million plus an estimated $95 million in interest to the Company.

 

  6.

Intercompany transfers between Lehman entities are listed as disbursements for the paying entity and receipts for the receiving entity.

 

4

LEHMAN BROTHERS HOLDINGS INC. and Other Debtors and Other Controlled Entities

Summary Schedule of Cash Receipts and Disbursements (a)

June 1, 2011 - June 30, 2011

Unaudited ($ in millions, foreign currencies reflected in USD equivalents)

 

                                                                    Total Debtors
and Other
Controlled
Entities		  
        Debtor Entities     Other Controlled Entities (b)    
        LBHI     LBSF     LCPI     Other     Total     LAMCO     LB1 Grp     PAMI     Other     Total    

Beginning Total Cash and Investments (6/1/11)

  

(c)(d)

   $ 3,762      $ 9,194      $ 3,267      $ 3,444      $ 19,668      $ 24      $ 1,307      $ -      $ 2,498      $ 3,829      $ 23,497   

Restricted Cash

   (e)     (1,661 )      (681 )      (48 )      (52 )      (2,442 )      -        -        -        (73 )      (73 )      (2,515 ) 
                                                                                         

Beginning Free Cash and Investments

       2,101        8,513        3,219        3,393        17,226        24        1,307        -        2,425        3,756        20,983   
                                                                                         

Sources of Cash

                        

Derivatives

       -        416        -        91        507        -        -        -        -        -        507   

Loans

       14        -        91        -        105        -        -        -        -        -        105   

Private Equity / Principal Investing

       30        -        5        -        35        -        110        -        49        159        195   

Real Estate

       67        -        211        -        278        -        -        45        8        54        332   

Other

       100        229        63        7        400        -        -        -        1        1        400   

Asia / South America

       -        -        -        -        -        -        -        -        9        9        9   

Inter-Company Transfers

       46        -        -        1        47        -        -        -        1        1        48   
                                                                                         

Total Sources of Cash

       258        646        371        99        1,373        -        110        45        67        223        1,595   
                                                                                         

Uses of Cash

                        

Non-Operating (Principally Preservation of Assets)

   

                    

Derivatives

       -        (5 )      -        -        (5 )      -        -        -        -        -        (5 ) 

Loans

       -        -        (76 )      -        (76 )      -        -        -        -        -        (76 ) 

Private Equity / Principal Investing

       -        -        -        -        -        -        (1 )      -        -        (1 )      (1 ) 

Real Estate

       (16 )      -        (53 )      -        (70 )      -        (2 )      (1 )      (1 )      (3 )      (73 ) 

Other

       (21 )      (197 )      (57 )      (1 )      (276 )      -        -        -        -        -        (276 ) 

Operating

       (186 )      (2 )      -        -        (188 )      (8 )      -        -        (2 )      (10 )      (198 ) 

Asia / South America

       -        -        -        -        -        -        -        -        (9 )      (9 )      (9 ) 

Inter-Company Transfers

       (1 )      -        -        (1 )      (2 )      -        -        (45 )      -        (45 )      (47 ) 
                                                                                         

Total Uses of Cash

       (225 )      (204 )      (186 )      (2 )      (617 )      (8 )      (3 )          (46 )      (11 )      (68 )      (685 ) 
                                                                                         

Net Cash Flow

       33        441        184        97        756        (8 )      107        -        56        155        910   

FX Fluctuation

   (s)     -        -        -        1        1        -        -        -        1        1        2   
                                                                                         

Ending Total Cash and Investments

   (c)     3,796        9,635        3,452        3,542        20,424        15        1,415        -        2,555        3,985        24,409   

Restricted Cash

   (e)           (1,751 )      (681 )      (48 )      (52 )      (2,532 )      -        -        -        (74 )      (74 )      (2,606 ) 
                                                                                         

Ending Free Cash and Investments (6/30/11)

     $ 2,045      $       8,954      $       3,403      $       3,490      $       17,893      $ 15      $       1,415      $ -      $       2,481      $       3,911      $       21,803   
                                                                                         

Totals may not foot due to rounding.

 

5

LEHMAN BROTHERS HOLDINGS INC. and Other Debtors and Other Controlled Entities

Schedule of Cash Receipts and Disbursements (a)

June 1, 2011 - June 30, 2011

Unaudited ($ in millions, foreign currencies reflected in USD equivalents)

 

                                                                                Total Debtors
and Other
Controlled
Entities		  
          Debtor Entities      Other Controlled Entities (b)     
              LBHI              LBSF              LCPI              Other              Total              LAMCO              LB1 Grp              PAMI              Other              Total         

Beginning Total Cash and Investments (6/1/11)

    (c) (d)     $         3,762          $         9,194          $         3,267          $         3,444          $         19,668          $ 24          $ 1,307          $ -          $ 2,498          $ 3,829          $ 23,497     

Restricted Cash

    (e)      (1,661)          (681)          (48)          (52)          (2,442)          -           -           -           (73)          (73)          (2,515)    
                                                                                                     

Beginning Free Cash and Investments

         2,101           8,513           3,219           3,393           17,226           24           1,307           -               2,425           3,756           20,983     
                                                                                                     

Sources of Cash

                                    

Derivatives

                                    

Collections from Live / Terminated Trades

    (f)      -           416           -           91           507           -           -           -           -           -           507     

Loans

                                    

Agency Receipts

    (g)      -           -           28           -           28           -           -           -           -           -           28     

Principal

         13           -           52           -           65           -           -           -           -           -           65     

Interest

         1           -           11           -           12           -           -           -           -           -           12     

Private Equity / Principal Investing

                                    

Principal

    (h)      27           -           3           -           30           -           107           -           2           109           139     

Interest

    (i)      3           -           2           -           5           -           4           -           47           50           55     

Real Estate

                                    

Principal

         60           -           204           -           265           -           -           44           8           53           317     

Interest

         7           -           7           -           14           -           -           1           -           1           15     

Other

                                    

Interest

    (j)      3           17           6           3           29           -           -           -           1           1           29     

Return of Hedging Collateral

    (k)      26           213           57           4           300           -           -           -           -           -           300     

Other

    (l)      71           -           -           -           71           -           -           -           -           -           71     

Asia / South America

         -           -           -           -           -           -           -           -           9           9           9     

Inter-Company Transfers

    (m)      46           -           -           1           47           -           -           -           1           1           48     
                                                                                                     

Total Sources of Cash

         258           646           371           99           1,373           -           110           45           67           223           1,595     
                                                                                                     

 

6

LEHMAN BROTHERS HOLDINGS INC. and Other Debtors and Other Controlled Entities

Schedule of Cash Receipts and Disbursements (a)

June 1, 2011 - June 30, 2011

Unaudited ($ in millions, foreign currencies reflected in USD equivalents)

 

                                                                      Total Debtors
and Other
Controlled		  
          Debtor Entities     Other Controlled Entities (b)    
              LBHI             LBSF             LCPI             Other             Total             LAMCO             LB1 Grp             PAMI             Other             Total         Entities  

Uses of Cash

                        

Non-Operating (Principally Preservation of Assets)

                        

Derivatives

                        

Other

       -          (5)         -          -          (5)         -          -          -          -          -          (5)    

Loans

                        

Agency Disbursements

     (g)        -          -          (28)         -          (28)         -          -          -          -          -          (28)    

Preservation of Assets

       -          -          (2)         -          (2)         -          -          -          -          -          (2)    

Other

     (n)        -          -          (46)         -          (46)         -          -          -          -          -          (46)    

Private Equity / Principal Investing

                        

Capital Calls

       -          -          -         -          -          -          (1)         -          -          (1)         (1)    

Real Estate

                        

Preservation of Assets

       (16)         -          (32)         -          (49)         -          (2)         (1)         (1)         (3)         (52)    

Other

     (n)        -          -          (21)         -          (21)         -          -          -          -          -              (21)    

Other

                        

Hedging Collateral

     (o)        (19)         (195)         (54)         (1)         (269)         -          -          -          -          -          (269)    

Other

       (2)         (2)         (3)         -          (7)         -          -          -          -          -          (7)    

Operating

                        

Compensation and Benefits

     (p)        (11)         -          -          -          (11)         (4)         -          -          (1)         (5)         (15)    

Professional Fees

     (q)        (20)         -          -          -          (20)         -          -          -          -          -              (20)    

Other

     (r)        (156)         (2)         -          -          (158)         (4)         -          -          (1)         (5)         (163)    

Asia / South America

       -          -          -          -          -          -          -          -          (9)         (9)         (9)    

Inter-Company Transfers

     (m)        (1)         -          -          (1)         (2)         -          -          (45)         -          (45)         (47)    
                                                                                         

Total Uses of Cash

       (225)         (204)         (186)         (2)         (617)         (8)         (3)              (46)         (11)         (68)         (685)    
                                                                                         

Net Cash Flow

       33          441          184          97          756          (8)         107          -          56          155          910     

FX Fluctuation

     (s)        -          -          -              1          1          -              -              -          1          1          2     
                                                                                         

Ending Total Cash and Investments

     (c)        3,796          9,635          3,452          3,542          20,424          15          1,415          -          2,555          3,985          24,409     

Restricted Cash

     (e)                (1,751)         (681)         (48)         (52)         (2,532)         -          -          -          (74)         (74)         (2,606)    
                                                                                         

Ending Free Cash and Investments (6/30/11)

      $ 2,045         $         8,954         $         3,403         $         3,490         $        17,893         $ 15         $ 1,415         $ -         $         2,481         $         3,911         $      21,803     
                                                                                         

Totals may not foot due to rounding.

 

7

LEHMAN BROTHERS HOLDINGS INC. and Other Debtors and Other Controlled Entities

Schedule of Cash Receipts and Disbursements (a)

June 1, 2011 - June 30, 2011

Unaudited ($ in millions, foreign currencies reflected in USD equivalents)

Notes:

(a) Includes cash receipts and disbursements for all Debtor Entities and Other Controlled Entities, globally. Activity in Derivatives, Loans, Private Equity / Principal Investing, Real Estate and Other reflects bank accounts that are managed and reconciled by Lehman's U.S. and European operations. Activity in Asia and South America reflects bank accounts that are managed and reconciled by Lehman's Asia and South American operations.

(b) Other Controlled Entities include Non-Debtor entities which are under the control of LBHI, except for Aurora Bank and Woodlands Commercial Bank, which are not reflected in this schedule. Bank accounts for Lehman Brothers Bancorp Inc., LBTC Transfer Inc. (f/k/a Lehman Brothers Trust Company N.A.) and Lehman Brothers Trust Company of Delaware were not reflected on this schedule in prior MORs, but are now included on this schedule.

(c) Beginning and Ending Cash and Investments balance excludes cash posted for hedging activity.

(d) Beginning Cash and Investments was increased by $1 million for LCPI and $19 million for Other Controlled Entities from Ending Cash and Investments in the May 2011 Schedule of Cash Receipts and Disbursements, in order to make an adjustment for interest amortization (LCPI) and include bank account balances not previously reflected (Other Controlled Entities).

(e) Restricted balances are preliminary estimates of cash in co-mingled or segregated accounts associated with pledged assets, court ordered segregated accounts, funds administratively held by banks and other identified funds which may not belong to the Debtors or Other Controlled Entities.

(f) Collections from Live / Terminated Trades for Other Debtors primarily reflects the following: LBCC $79 million and LOTC $9 million.

(g) Reflects the collection and subsequent distribution of principal and interest to syndicated loan participants.

(h) Primarily reflects $51 million from the sale of a private equity investment, $39 million in redemptions/distributions from GP/LP investments and a $38 million distribution from a direct investment.

(i) Primarily reflects the receipt of a $40 million preferred dividend from Neuberger Berman to Other Controlled Entities.

(j) Reflects interest collected on investment portfolios.

(k) Reflects the return of cash posted to hedge foreign currency and interest rate risk for Derivatives, Loans, Real Estate and Asset Backed Securities.

(l) Primarily reflects a $61 million distribution from bond reserve accounts which are shown in restricted cash.

(m) Primarily reflects transfers from Other Controlled Entities to LBHI to settle post-petition intercompany advances made for the preservation of Real Estate assets.

(n) Primarily reflects $35 million in disbursements of restricted cash to the Spruce and Verano trustees for funds received by LCPI post-filing on assets that were participated to the Spruce and Verano CDO structures and a $26 million court-approved payment to Sumitomo for a secured claim. Spruce and Verano funds will be subsequently disbursed by the trustees in July 2011 to the Spruce and Verano noteholders (LBHI and LCPI).

(o) Reflects cash posted to hedge foreign currency and interest rate risk for Derivatives, Loans, Real Estate and Asset Backed Securities.

(p) Compensation and Benefits includes Lehman employees as well as fees paid to Alvarez & Marsal as interim management. A portion of the $15 million related to LBHI and LAMCO will be subject to future cost allocation to various Lehman legal entities.

(q) A portion of the $20 million will be subject to future cost allocation to various Lehman legal entities.

(r) Primarily reflects a court-approved $144 million tax settlement with New York State by LBHI. The remaining expenses primarily relate to occupancy, the Transition Services Agreement, other taxes, insurance and infrastructure costs. A portion of the $160 million related to LBHI and LAMCO will be subject to future cost allocation to various Lehman legal entities.

(s) Reflects fluctuation in value of foreign currency bank accounts.

 

8

LEHMAN BROTHERS HOLDINGS INC. (“LBHI”) AND OTHER DEBTORS AND OTHER

CONTROLLED ENTITIES

BASIS OF PRESENTATION

SCHEDULE OF PROFESSIONAL FEE AND EXPENSE DISBURSEMENTS

DATED FROM FILING DATE TO JUNE 30, 2011

The information and data included in this Monthly Operating Report (“MOR”) are derived from sources available to Lehman Brothers Holdings Inc. (“LBHI”) and its Controlled Entities (collectively, the “Company”). The term “Controlled Entities” refers to those entities that are directly or indirectly controlled by LBHI, including LAMCO LLC (“LAMCO”), and excludes, among other things, those entities that are under separate administrations in the United States or abroad, including Lehman Brothers Inc., which is the subject of proceedings under the Securities Investor Protection Act. LBHI and certain of its Controlled Entities have filed for protection under Chapter 11 of the Bankruptcy Code, and those entities are referred to herein as the “Debtors”. The Debtors’ Chapter 11 cases have been consolidated for procedural purposes only and are being jointly administered pursuant to Rule 1015(b) of the Federal Rules of Bankruptcy Procedure. The Debtors have prepared this MOR, as required by the Office of the United States Trustee, based on the information available to the Debtors at this time, but note that such information may be incomplete and may be materially deficient in certain respects. This MOR is not meant to be relied upon as a complete description of the Debtors, their business, condition (financial or otherwise), results of operations, prospects, assets or liabilities. The Debtors reserve all rights to revise this report.

 

  1.

This MOR is not prepared in accordance with U.S. generally accepted accounting principles (GAAP). This MOR should be read in conjunction with the financial statements and accompanying notes in the Company’s reports that were filed with the United States Securities and Exchange Commission.

 

  2.

This MOR is not audited and will not be subject to audit or review by the Company’s external auditors at any time in the future.

 

  3.

The professional fee disbursements presented in this report reflect the date of actual cash payments to professional service providers. The Debtors have incurred additional professional fee expenses during the reporting period that will be reflected in future MORs as cash payments are made to providers.

 

9

LEHMAN BROTHERS HOLDINGS INC. and Other Debtors and Other Controlled Entities

Schedule of Professional Fee and Expense Disbursements (a)

June 2011

Unaudited ($ in thousands)

 

              June-2011         Filing Date
      Through June-2011    (b)		  

 

Debtors - Claims and Noticing Agent

      

Epiq Bankruptcy Solutions LLC

   Claims Management and Noticing Agent    $ -            $ 13,546       

Debtors - Section 363 Professionals

      

Alvarez & Marsal LLC

   Interim Management     8,952         451,148       

Kelly Matthew Wright

   Art Consultant and Auctioneer     -             91       

Natixis Capital Markets Inc.

   Derivatives Consultant     -             14,590       

Debtors - Section 327 Professionals

      

Bingham McCutchen LLP

   Special Counsel - Tax     -             18,023       

Bortstein Legal LLC

   Special Counsel - IT and Other Vendor Contracts     25         3,914       

Clyde Click, P.C.

   Special Counsel - Real Estate     32         149       

Curtis, Mallet-Prevost, Colt & Mosle LLP

   Special Counsel - Conflicts     -             31,376       

Dechert LLP

   Special Counsel - Real Estate     330         2,199       

Deloitte LLP

   Tax Services     -             244       

Discover Ready LLC

   eDiscovery Services     435         13,635       

Ernst & Young LLP

   Audit and Tax Services     -             1,556       

Gibson Dunn & Crutcher LLP

   Special Counsel - Real Estate     149         2,391       

Hudson Global Resources

   Contract Attorneys     253         10,730       

Huron Consulting

   Tax Services     -             2,145       

Jones Day

   Special Counsel - Asia and Domestic Litigation     1,551         54,158       

Kasowitz, Benson, Torres & Friedman

   Special Counsel - Litigation     -             928       

Kleyr Grasso Associes

   Special Counsel - UK     74         528       

Latham & Watkins LLP

   Special Counsel - Real Estate     38         518       

Lazard Freres & Co.

   Investment Banking Advisor     482         28,622       

McKenna Long & Aldridge LLP

   Special Counsel - Commercial Real Estate Lending     -             4,935       

MMOR Consulting

   Tax Services     -             399       

Momo-o, Matsuo & Namba

   Special Counsel - Asia     -             194       

O'Neil Group

   Tax Services     77         1,672       

Pachulski Stang Ziehl & Jones

   Special Counsel - Real Estate     -             2,099       

Paul, Hastings, Janofsky & Walker LLP

   Special Counsel - Real Estate     231         1,525       

PriceWaterhouse Coopers LLP

   Tax Services     -             1,564       

Reed Smith LLP

   Special Counsel - Insurance     27         607       

Reilly Pozner LLP

   Special Counsel - Mortgage Litigation and Claims     290         6,538       

Simpson Thacher & Bartlett LLP

   Special Counsel - SEC Reporting, Asset Sales, and Congressional Testimony     -             2,639       

SNR Denton LLP

   Special Counsel - Real Estate     126         1,008       

Sutherland LLP

   Special Counsel - Tax     226         589       

Weil Gotshal & Manges LLP

   Lead Counsel     9,125         318,933       

Windels Marx Lane & Mittendorf, LLP

   Special Counsel - Real Estate     56         2,747       

Wollmuth Maher & Deutsch LLP

   Special Counsel - Derivatives     99         950       

Creditors - Section 327 Professionals

      

FTI Consulting Inc.

   Financial Advisor     2,868         65,929       

Houlihan Lokey Howard & Zukin Capital Inc.

   Investment Banking Advisor     333         12,466       

Milbank Tweed Hadley & McCloy LLP

   Lead Counsel     -             102,131       

Quinn Emanuel Urquhart Oliver & Hedges LLP

   Special Counsel - Conflicts     -             18,684       

Richard Sheldon, Q.C.

   Special Counsel - UK     100         256       

Examiner - Section 327 Professionals

      

Duff & Phelps LLC

   Financial Advisor     -             42,502       

Jenner & Block LLP

   Examiner     25         58,428       

Fee Examiner

      

Godfrey & Kahn, S.C.

   Fee Examiner (Current)     269         1,348       

Feinberg Rozen LLP

   Fee Examiner (Previous)     -             3,158       

Brown Greer Plc

   Fee and Expense Analyst     -             653       
                 

Total Non-Ordinary Course Professionals

      26,173         1,302,447       
                 

Debtors - Ordinary Course Professionals

      1,327         40,839       
                 

US Trustee Quarterly Fees

       -         1,306       
                 

Total Professional Fees and UST Fees (c)

      $ 27,500        $ 1,344,592       
                 

 

(a) All professional fees have been paid by LBHI; however, a portion has been charged back to debtor and non-debtor subsidiaries based on the direct costs associated with each entity and an allocation methodology.
(b) The figures reflected in this table represent cash disbursements from LBHI's filing date through the end of June 2011. The figures do not include accruals.
(c) Excludes professional services rendered on behalf of non-debtor entities which are invoiced separately.

 

10

LEHMAN BROTHERS HOLDINGS INC. (“LBHI”) AND OTHER DEBTORS AND OTHER

CONTROLLED ENTITIES

BASIS OF PRESENTATION

QUARTERLY HEDGING TRANSACTIONS UPDATE

AS OF JUNE 30, 2011

The information and data included in this report are derived from sources available to Lehman Brothers Holdings Inc. (“LBHI”) and its Controlled Entities (collectively, the “Company”). The term “Controlled Entities” refers to those entities that are directly or indirectly controlled by LBHI, and excludes, among other things, those entities that are under separate administrations in the United States or abroad, including Lehman Brothers Inc., which is the subject of proceedings under the Securities Investor Protection Act. LBHI and certain of its Controlled Entities have filed for protection under Chapter 11 of the Bankruptcy Code, and those entities are referred to herein as the “Debtors”. The Debtors’ Chapter 11 cases have been consolidated for procedural purposes only and are being jointly administered pursuant to Rule 1015(b) of the Federal Rules of Bankruptcy Procedure (the “Bankruptcy Rules”).

On March 11, 2009, the United States Bankruptcy Court for the Southern District of New York overseeing the Debtors’ Chapter 11 cases (the “Court”) entered an “Order Pursuant to Sections 105 and 364 of the Bankruptcy Code Authorizing the Debtors to Grant First Priority Liens in Cash Collateral Posted in Connection With the Hedging Transactions the Debtors Enter Into Through Certain Futures and Prime Brokerage Accounts” [Docket No. 3047] (the “Derivatives Hedging Order”).

On July 16, 2009 the Court entered a separate “Order Pursuant to Sections 105 and 364 of the Bankruptcy Code Authorizing the Debtors to Grant First Priority Liens in Collateral Posted in Connection With the Hedging Transactions” [Docket No. 4423] (the “Residential Loan Order”).

On January 14, 2010 the Court entered a separate “Order Granting LBHI’s Motion for Authorization, Pursuant to Sections 105, 363 and 364 of the Bankruptcy Code, to Sell Certain Asset Backed-Securities and Related Relief” [Docket No. 6659], which authorized the Company to enter into hedging transactions to hedge against loss of value from fluctuations in foreign exchange rates (the “Asset Backed-Securities Hedging Order”).

On November 18, 2010 the Court entered a separate “Order Pursuant to Sections 105 and 364 of the Bankruptcy Code Authorizing the Debtors to Grant First Priority Liens in Collateral Posted in Connection with Foreign Exchange Hedging Transactions” [Docket No. 12891] (the “Macro FX Hedging Order”).

Terms used and not otherwise defined herein shall have the meanings ascribed thereto in the Derivatives Hedging Order, the Residential Loan Order, the Asset Backed-Securities Hedging Order or the Macro FX Hedging Order, as the case may be.

The Debtors have prepared this Quarterly Hedging Transactions Update, as required by the Derivatives Hedging Order, the Residential Loan Order, the Asset Backed-Securities Hedging Order and the Macro FX Hedging Order, based on the information available to the Debtors at this time, but note that such information is partially based on market pricing which is subject to day-to-day fluctuations. The Debtors reserve all rights to revise this report.

Derivatives Hedging Order. Between the entry of the Derivatives Hedging Order and June 30, 2011 (the “Report Date”), the Debtors have executed 11 Hedging Transactions and the current liquidation value of collateral posted approximates $309 million. The Open Derivative Positions correspond to 37 non-terminated derivative contracts with an estimated recovery value of approximately $395 million as of the Report Date. The expected recovery amounts are determined using various models, data sources, and certain assumptions regarding contract provisions. The Company expects to adjust the amounts recorded for the Open Derivatives Positions in the future; such adjustments (including write-downs and write-offs) may be material. For further description regarding derivative recovery values, please refer to the March 2011 Supplemental Monthly Operating Report filed on July 21, 2011.

As of the Report Date, the Hedging Transactions were allocated to the individual Debtors as set forth on page 13.

 

11

Residential Loan Order. Between the entry of the Residential Loan Order and the Report Date, there were no Residential Hedging Transactions.

Asset Backed-Securities Hedging Order. Between the entry of the Asset Backed-Securities Hedging Order and the Report Date, the Debtors have executed 1 Hedging Transaction. The current liquidation value of the collateral posted approximates $4 million. The estimated recovery value of the Asset Backed-Securities portfolio as of the Report Date approximates $83 million. The expected recovery amounts for the underlying assets are subject to market fluctuations (obligor performance, interest rate environment, etc.) and are subject to change.

As of the Report Date, the Hedging Transactions were allocated to the individual Debtor as set forth on the following page.

Macro FX Hedging Order. Between the entry of the Macro FX Hedging Order and the Report Date, the Debtors have proposed and executed 3 Hedging Transactions. The current liquidation value of the collateral posted approximates $59 million. The estimated recovery value of the underlying assets being hedged approximates $1.2 billion as of the Report Date. The expected recovery amounts for the underlying assets are subject to market fluctuations (obligor performance, interest rate environment, etc.) and are subject to change.

As of the Report Date, the Hedging Transactions were allocated to the individual Debtors as set forth on the following page.

 

12

Lehman Brothers Holdings Inc.

As of June 30, 2011

Quarterly Hedging Report

Derivatives Hedging Order

 

Debtor

    Current Liquidation Value
of Collateral Posted for
  Hedging Transactions (a)  		     Estimated Recovery
  Value of Receivables  
Being Hedged		  

Lehman Brothers Special Financing Inc. (“LBSF”)

      $ 301,414,739          $ 378,803,115     

Lehman Brothers Financial Products Inc. (“LBFP”)

      7,894,786          15,768,841     
                

Total

      $ 309,309,524          $ 394,571,956     
                

Asset Backed-Securities Hedging Order

 

Debtor

    Current Liquidation Value
of Collateral Posted for
  Hedging Transactions (a)  		     Estimated Recovery
  Value of Receivables  
Being Hedged		  

Lehman Brothers Holdings Inc. (“LBHI”)

      $ 4,495,048          $ 82,647,753     
                

Total

      $ 4,495,048          $ 82,647,753     
                

Macro FX Hedging Order

 

Debtor

    Current Liquidation Value
of Collateral Posted for
  Hedging Transactions (a)  		     Estimated Recovery
  Value of Receivables  
Being Hedged		  

Lehman Brothers Holdings Inc. (“LBHI”)

      $ 3,657,455          $ 67,247,429     

Lehman Commercial Paper Inc. (“LCPI”)

      55,753,930          1,145,679,071     
                

Total

      $ 59,411,384          $     1,212,926,500     
                

(a) Value of collateral represents initial margin posted, net of any gains or losses on hedging transactions. Liquidation value excludes any subsequent variation margin posted or returned for LBHI and LCPI under the Asset Backed-Securities and Macro FX Hedging Orders.

 

13