Lehman Brothers files for Chapter 11 protection
Monday, September 15, 2008 10:37 AM PDT
NEW YORK (AP) — Lehman Brothers, a 158-year-old investment bank choked by the credit crisis and falling real estate values, filed for Chapter 11 protection in the biggest bankruptcy filing ever on Monday and said it was trying to sell off key business units.
The filing was made in the U.S. Bankruptcy Court in the Southern District of New York by Lehman Brothers Holdings Inc., the bank’s holding company. The case had been assigned to Judge James M. Peck.
Lehman fell under the weight of $60 billion in soured real estate holdings, and the credit market’s dislocation ultimately forced it to seek court protection. The credit crisis has caused global banks to write down more than $300 billion in asset value since last year, and caused the shotgun sales of Merrill Lynch & Co. and Bear Stearns Cos.
Lehman’s bankruptcy filing marks the end of a Wall Street firm that started the U.S. cotton trade before the Civil War and financed the railroads that built a nation.
The company’s roots began in 1844 when Henry Lehman immigrated from Rimpar, Germany to Alabama, where he established a dry goods store that catered to local cotton farmers in Montgomery. Lehman Brothers evolved from merchandising to a commodities broker, and then later into underwriting where the firm helped finance construction of the Pennsylvania Railroad, among others.
Chairman and Chief Executive Richard S. Fuld, who joined Lehman as a college student in 1969 and was the longest serving CEO on Wall Street, now has the dubious task of winding down the company’s $639 billion of assets. It has about 25,000 employees worldwide, joining the swell of unemployed bankers and traders hurt by the credit crisis.
Many Lehman employees seen entering its headquarters in midtown Manhattan tucked their chins down to avoid talking to the media and others who had lined up behind metal barriers in front of the building.
Some carried empty shopping, tote bags or gym bags in to the office. Some walked in with ties undone or wore more casual clothes like polo shirts than they may have otherwise.
Lehman’s filing is the biggest corporate bankruptcy in history in terms of assets held, Mike Bickford of Jupiter eSources said. The next biggest bankruptcy was Worldcom Inc., with $126 billion in assets, and Enron Corp., with $81 billion. The figures are not adjusted for inflation.
Lehman plans an orderly liquidation of its assets in the coming months, and possibly years.
In Washington, the Securities and Exchange Commission said its examiners will remain at the offices of Lehman Brothers to oversee an ‘‘orderly transfer’’ of assets in retail customer accounts to one or more brokerage firms that are insured by the Securities Investor Protection Corp.
The SEC noted in a statement that Lehman’s decision to file for bankruptcy protection does not affect the SIPC protection covering the firm’s retail securities customers.
The SEC also said it is coordinating with overseas regulators to protect Lehman’s customers and to maintain orderly markets.
