Administrators astounded by Lehman demise
Administrators charged with unwinding Lehman Brothers admit amazement at firm's collapse
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Monday, 15, Sep 2008 06:09
The team charged with unwinding Lehman Brothers has admitted being amazed the firm failed, as it was revealed some staff had already left and amid uncertainty over wages.
The American bank filed for chapter 11 bankruptcy last night as a rescue package failed to materialise.
"It seems amazing a business of this size can fail. It highlights the importance of market confidence," said Tony Lomas, lead administrator from PricewaterhouseCoppers (PWC), at a news conference at Lehman's European headquarters in London's Canary Wharf.
"We saw it with Northern Rock last year and once confidence is gone there is no going back."
The PWC team admitted Lehman Brothers' UK subsidiaries were left with no cash as funds headed to New York before the firm went to the wall.
As such Mr Lomas admitted it was uncertain whether employees will be paid at the end of the week – with as much as $75 million (£41.8 million) worth of wages to be paid.
"Technically, when we were appointed, there was no cash in the various companies," he said. "We started the day with no certainty of paying. We still don't know the position."
It was also admitted some staff were already leaving the firm, although many will stay on as administrators wind down the company over time to maximise value.
Some sales staff will not be expected to stay as the firm unwinds.
"Some staff went home today as senior management discuss the future. Some took their personal items," the PWC administrator said
"This is a period of stress and distress for people and we are careful to work with them."
He added: "[Lehmans] is extraordinarily complex with a vast value, so will take considerable amount of time to unravel."
Mr Lomas added it was his role to look at four particular UK subsidiaries to identify how to maximise realisations. "Everything is done with objective of maximising cash for creditors," he said.
The aim – he explained – was to downsize the firm to gain the greatest returns over simple liquidation.
Steven Pearson at PWC added: "It is an exceptionally complex organisation worth billions of pounds.
"We are looking to minimise the risks bank takes, and minimise risk in the market place."
Administrators – called in over the weekend when it was not certain Lehman Brothers in the US would file for bankruptcy - have already started discussions with the Bank of England and the regulator the Financial Services Authority.