Lehman Brothers Holdings Inc Plan Trust (LEHMQ)
Filed: 28 Mar 18, 12:00am
Exhibit 99.1
UNITED STATES BANKRUPTCY COURT
SOUTHERN DISTRICT OF NEW YORK
In re:
| Chapter 11 Case No. | |
| Lehman Brothers Holdings Inc., et al., | 08-13555 | |
| Jointly Administered | ||
Debtors. | ||
QUARTERLY FINANCIAL REPORT
AS OF DECEMBER 31, 2017
| DEBTORS’ ADDRESS: | LEHMAN BROTHERS HOLDINGS INC. | |
| c/o KRISTINE DICKSON – CHIEF FINANCIAL OFFICER | ||
| 277 PARK AVENUE | ||
| 46th FLOOR | ||
| NEW YORK, NY 10172 | ||
| DEBTORS’ ATTORNEYS: | WEIL, GOTSHAL & MANGES LLP | |
| c/o JACQUELINE MARCUS, GARRETT A. FAIL | ||
| 767 FIFTH AVENUE | ||
| NEW YORK, NY 10153 | ||
| REPORT PREPARER: | LEHMAN BROTHERS HOLDINGS INC., AS PLAN ADMINISTRATOR | |
| Date: March 28, 2018 |
Quarterly Financial Report as of December 31, 2017 (Unaudited)
Table of Contents
I. | Schedule of Debtors | 3 | ||||||||
II. | Notes to the Balance Sheets and Management’s Discussion & Analysis | 4 | ||||||||
| Note 1 – Basis of Presentation | 4 | |||||||||
| Note 2 – Use of Estimates | 5 | |||||||||
| Note 3 – Cash and Short-Term Investments | 5 | |||||||||
| Note 4 – Cash and Short-Term Investments Pledged or Restricted | 6 | |||||||||
| Note 5 – Financial Instruments and Other Inventory Positions | 7 | |||||||||
| Note 6 – Receivables from Debtors and Debtor-Controlled Entities and Other Assets | 10 | |||||||||
| Note 7 – Investments in Affiliates | 12 | |||||||||
| Note 8 – Due from/to Affiliates | 13 | |||||||||
| Note 9 – Payables to Debtors and Debtor-Controlled Entities and Other Liabilities | 22 | |||||||||
| Note 10 – Taxes Payable | 23 | |||||||||
| Note 11 – Liabilities Subject to Compromise | 24 | |||||||||
| Note 12 – Legal Proceedings | 26 | |||||||||
| Note 13 – Currency Translation | 28 | |||||||||
| Note 14 – Financial Systems and Control Environment | 28 | |||||||||
III. | Balance Sheets | 29 | ||||||||
QUESTIONS
The Company has established an email address to receive questions from readers regarding this presentation and its other financial disclosures. The Company plans to review questions received, and for those subjects which the Company determines a response would not (i) violate a confidentiality provision, (ii) place the Company in a competitive or negotiation disadvantage, or (iii) be unduly burdensome relative to the value of information requested, the Company shall endeavor to post a response (maintaining the anonymity of the originators of the questions). The Company assumes no obligation to respond to email inquiries.
Please email questions, with document references as relevant, to:
QUESTIONS@lehmanholdings.com
The Company’s previously posted responses can be found on the Epiq website maintained for the Company:
www.lehman-docket.com under the Key Documents tab and the Responses to Questions Submitted category
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Quarterly Financial Report as of December 31, 2017 (Unaudited)
I. Schedule of Debtors
The twenty three entities listed below (the “Debtors”) filed for bankruptcy in the United States Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”) on the dates indicated below. On December 6, 2011, the Bankruptcy Court confirmed the Modified Third Amended Joint Chapter 11 Plan of Lehman Brothers Holdings Inc. and its Affiliated Debtors (the “Plan”). On March 6, 2012, the “Effective Date” (as defined in the Plan) occurred. As of the date hereof, the following Debtors’ chapter 11 cases remain open:
| Case No. | Date Filed (“Commencement Date”) | |||||||
Lehman Brothers Holdings Inc. (“LBHI”) | 08-13555 | 9/15/2008 | ||||||
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 | ||||||
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 | ||||||
The following Debtors’ chapter 11 cases were closed in 2016, pursuant to final decrees entered by the Bankruptcy Court (Docket No. 51920 and No. 54163):
| Case No. | Date Filed | Date Closed | ||||||||||
LB 745 LLC | 08-13600 | 9/16/2008 | 1/28/2016 | |||||||||
PAMI Statler Arms LLC | 08-13664 | 9/23/2008 | 1/28/2016 | |||||||||
CES Aviation LLC | 08-13905 | 10/5/2008 | 1/28/2016 | |||||||||
CES Aviation V LLC | 08-13906 | 10/5/2008 | 1/28/2016 | |||||||||
CES Aviation IX LLC | 08-13907 | 10/5/2008 | 1/28/2016 | |||||||||
LB 2080 Kalakaua Owners LLC | 09-12516 | 4/23/2009 | 1/28/2016 | |||||||||
LB Somerset LLC | 09-17503 | 12/22/2009 | 1/28/2016 | |||||||||
LB Preferred Somerset LLC | 09-17505 | 12/22/2009 | 1/28/2016 | |||||||||
East Dover Limited | 08-13908 | 10/5/2008 | 12/15/2016 | |||||||||
Luxembourg Residential Properties Loan Finance S.a.r.l. | 09-10108 | 1/7/2009 | 12/15/2016 | |||||||||
Merit LLC | 09-17331 | 12/14/2009 | 12/15/2016 | |||||||||
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Quarterly Financial Report as of December 31, 2017 (Unaudited)
II. Notes to the Balance Sheets and Management’s Discussion & Analysis
Note 1 – Basis of Presentation
Objectives
On the Effective Date, the Plan became effective and the Debtors emerged from bankruptcy with a new Board of Directors (LBHI’s Board of Directors hereinafter referred to as the “Board”). The Company continues to pursue the objectives of asset value maximization and timely distributions to creditors of available cash through the optimal execution of an orderly wind down process and the judicious and timely resolution of claims. Pursuant to the Plan, the Plan Administrator has made and expects to continue to make semi-annual distributions to creditors of Debtors, with each entity subject to review at each distribution date.
Basis of Presentation
The information and data included in the Quarterly Financial Report (the “Quarterly Financial Report”) are derived from sources available to the Debtors and Debtor-Controlled Entities (collectively, the “Company” or “Controlled Affiliates”). The term “Debtor-Controlled Entities” refers to those entities that are directly or indirectly controlled by LBHI and have not filed for protection under Chapter 11 of the Bankruptcy Code. Debtor-Controlled Entities excludes, among others, certain entities (such as Lehman Brothers Inc. (“LBI”), Lehman Brothers International (Europe) (in administration) (“LBIE”) and Lehman Brothers Japan (“LBJ”)) that were not managed or controlled by a Debtor as of the Effective Date and are under separate administrations in the U.S. or abroad, including proceedings under the Securities Investor Protection Act (collectively, “Non-Controlled Affiliates”).
The Company has prepared the Quarterly Financial Report based on the information available to the Company at the date of filing; however, such information may be incomplete and may be materially deficient. Material uncertainties continue to exist regarding the ultimate value realizable from the Company’s assets, the timing of asset recoveries, future costs, and the eventual level of allowed creditors’ claims. Accordingly, the Quarterly Financial Report is not meant to be relied upon as a complete description of the Company, its business, condition (financial or otherwise), results of
operations, prospects, assets or liabilities. The Company reserves all rights to revise this report.
The Quarterly Financial Report should be read in conjunction with the Company’s previous filings, including Form8-K reports as filed with the United States Securities and Exchange Commission (“SEC”), the Plan and related Disclosure Statement (the “Disclosure Statement”) dated August 31, 2011, and other documents filed after the Commencement Dates with various regulatory agencies or the Bankruptcy Court by LBHI, other Debtors and Debtor-Controlled Entities.
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Quarterly Financial Report as of December 31, 2017 (Unaudited)
Note 1 – Basis of Presentation(continued)
The Quarterly Financial Report:
| • | Is not audited nor prepared in accordance with U.S. Generally Accepted Accounting Principles (“GAAP”); |
| • | Does not reflectperiod-end adjustments, including accruals; and |
| • | Includes certain items that remain under continuing review by the Company and may be accounted for differently in future Quarterly Financial Reports. |
Trends and Uncertainties
The Company owns real estate, private equity investments, loans, derivative contracts, and other assets in a wide variety of local, domestic and global markets, and as such, in future periods the values of these assets are subject to trends, events and factors beyond the Company’s control, including but not limited to: the local, domestic and global economic environment; changes in budget, tax and fiscal policies in the U.S. and other countries; fluctuations in debt and equity markets, interest rates, and currency exchange rates; litigation risk; and changes in regulatory requirements.
Note 2 – Use of Estimates
In preparing the Quarterly Financial Report, the Company utilizes various estimates that affect reported amounts and disclosures. For example, estimates are used to determine expected recoverable amounts from certain financial instruments and other assets, and to establish claims amounts and various reserves.
Estimates are based on available information and judgment. As more information becomes available to the Company, including the outcome of various negotiations and litigations, the Company may revise estimates accordingly.
Note 3 – Cash and Short-Term Investments
Cash and short-term investments include:
| • | demand deposits; |
| • | interest-bearing deposits with banks; |
| • | U.S. and foreign money-market funds; |
| • | U.S. government obligations; |
| • | U.S. government guaranteed securities; and |
| • | investment grade corporate bonds and commercial paper. |
As of December 31 2017, the majority of the Company’s short-term investments were scheduled to mature by March 31, 2018.
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Quarterly Financial Report as of December 31, 2017 (Unaudited)
Note 4 – Cash and Short-Term Investments Pledged or Restricted
The following table summarizes the components of restricted cash as of December 31, 2017:
| Debtors | Debtor- Controlled | Total Debtors and Debtor- Controlled Entities | ||||||||||||||||||||||||||
| ($ in millions) | LBHI | LBSF | LCPI | Other | Total | |||||||||||||||||||||||
Reserves for Claims: | ||||||||||||||||||||||||||||
Disputed unsecured claims(1) | $ | 1,603 | $ | 421 | $ | 0 | $ | 108 | $ | 2,132 | $ | — | $ | 2,132 | ||||||||||||||
Distributions on Allowed Claims (not remitted) | 4 | 0 | 0 | 1 | 5 | — | 5 | |||||||||||||||||||||
Secured, Admin, Priority Claims and Other | 57 | 18 | 2 | 10 | 88 | — | 88 | |||||||||||||||||||||
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Subtotal, Claims Reserves | 1,664 | 439 | 2 | 119 | 2,224 | — | 2,224 | |||||||||||||||||||||
Other | 66 | — | 0 | — | 66 | 21 | 88 | |||||||||||||||||||||
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Total | $ | 1,730 | $ | 439 | $ | 2 | $ | 119 | $ | 2,291 | $ | 21 | $ | 2,312 | ||||||||||||||
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Totals may not foot due to rounding. | ||||||||||||||||||||||||||||
| (1) | Represents the cash reserve for the principal amount of disputed unsecured claims subsequent to the fourteenth Plan Distribution on December 7, 2017 (“D14”). |
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Quarterly Financial Report as of December 31, 2017 (Unaudited)
Note 5 – Financial Instruments and Other Inventory Positions
Financial instruments and other inventory positions are reported at estimated “recovery values,” which are determined by utilizing market prices, certain assumptions, estimates and/or pricing models to estimate future undiscounted cash flows.
The table below presents recovery values as of December 31, 2017 by asset portfolio, and the changes in recovery values since the previously filed Quarterly Financial Report as of October 5, 2017:
| Activity 10/06/17—12/31/17 | ||||||||||||||||
| Inventory as of | Recovery | Inventory as of | ||||||||||||||
$ in millions | October 5, 2017 | Value Change (1) | Cash Activities (2) | December 31, 2017 | ||||||||||||
Commercial Real Estate | ||||||||||||||||
Debtors: | ||||||||||||||||
Lehman Commercial Paper Inc. | 59 | 0 | (12 | ) | 48 | |||||||||||
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Subtotal Debtors | 59 | 0 | (12 | ) | 48 | |||||||||||
Debtor-Controlled | 10 | 0 | (0 | ) | 10 | |||||||||||
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Total Commercial Real Estate | 70 | 0 | (12 | ) | 58 | |||||||||||
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Loans and Residential Real Estate | ||||||||||||||||
Debtors: | ||||||||||||||||
Lehman Brothers Holdings Inc. | 3 | 1 | (1 | ) | 3 | |||||||||||
Lehman Commercial Paper Inc. | 12 | 6 | (2 | ) | 16 | |||||||||||
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Subtotal Debtors | 15 | 7 | (4 | ) | 19 | |||||||||||
Debtor-Controlled | 0 | 0 | (0 | ) | 0 | |||||||||||
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Total Loans and Residential Real Estate | 15 | 7 | (4 | ) | 19 | |||||||||||
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Private Equity / Principal Investments (PEPI) | ||||||||||||||||
Debtors: | ||||||||||||||||
Lehman Brothers Holdings Inc. | 3 | 4 | (0 | ) | 6 | |||||||||||
Lehman Commercial Paper Inc. | 3 | 0 | (0 | ) | 3 | |||||||||||
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Subtotal Debtors | 6 | 4 | (0 | ) | 9 | |||||||||||
Debtor-Controlled | 108 | (0 | ) | (13 | ) | 95 | ||||||||||
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Total Private Equity / Principal Investments | 114 | 4 | (14 | ) | 104 | |||||||||||
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Derivative Receivables and Related Assets | ||||||||||||||||
Debtors: | ||||||||||||||||
Lehman Brothers Special Financing Inc. | 56 | 33 | (39 | ) | 50 | |||||||||||
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Subtotal Debtors | 56 | 33 | (39 | ) | 50 | |||||||||||
Debtor-Controlled | 0 | 0 | (0 | ) | 0 | |||||||||||
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Total Derivative Receivables and Related Assets | 56 | 33 | (39 | ) | 50 | |||||||||||
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Totals | $ | 255 | $ | 45 | $ | (69 | ) | $ | 231 | |||||||
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| (1) | Represents adjustments to recovery values based on changes in market prices, realized gains or losses from assets sales above or below previously recorded recovery values, assumptions and/or estimates which, in the Company’s judgment, impact the Company’s recoverable value on the underlying assets. |
| (2) | Cash activities are presented net of disbursements. Amounts may differ from previously filed Schedules of Cash Receipts and Disbursements mainly due to timing and classification differences. Cash activities related to Derivative Receivables and Related Assets include collections on open and terminated trades, net of hedging activities. |
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Quarterly Financial Report as of December 31, 2017 (Unaudited)
Note 5 – Financial Instruments and Other Inventory Positions(continued)
Commercial Real Estate
Commercial Real Estate includes real estate owned properties, equity interests in commercial properties, and other real estate-related investments.
The Company utilizes various pricing models to determine the recovery values of assets within the Commercial Real Estate portfolio. These pricing models often incorporate current market prices, estimated future cash flows net of obligations to third parties, brokers’ opinions of value, and third party analyses.
As of December 31, 2017, the Company estimated the aggregate remaining recovery value for the Commercial Real Estate portfolio at $58 million. Between October 5, 2017 and December 31, 2017, the Company monetized $12 million of inventory.
Loans and Residential Real Estate
The Loans and Residential Real Estate portfolio includes commercial term loans with fixed maturity dates.
The Company utilizes internal pricing models, which incorporate current market prices and historical and estimated future cash flows to determine the recovery values of loans.
Potential future recoveries related to indemnity claims against third parties transferred to LBHI pursuant to the Fannie Mae and Freddie Mac Agreements (refer to the Mortgage Sellers litigation inNote 12 – Legal Proceedings, for additional information) are excluded from estimated recovery values, as the outcomes, many of which are subject to litigation, are uncertain and contingent upon various legal factors outside of the Company’s control.
As of December 31, 2017, the Company estimated the aggregate remaining recovery value for the Loans and Residential Real Estate portfolio at $19 million. Between October 5, 2017 and December 31, 2017, the Company (i) monetized $4 million of inventory, and (ii) increased the estimated recovery value for the portfolio by $7 million.
Private Equity / Principal Investments
Private Equity / Principal Investments include equity direct investments in companies, and general partner and limited partner interests in investment funds.
Recovery values for private equity / principal investments and general partner interests are based on comparable trading and transaction multiples, period end publicly quoted prices, and estimated future cash flows. Limited partner interests in private equity and hedge funds are valued at the net asset value unless an impairment is assessed. Recovery value may be impacted for those positions that are subject to confidentiality restrictions and transfer restrictions for which the Company may need consent from sponsors, general partners and/or portfolio companies in order to (i) share information regarding such positions with prospective buyers and/or (ii) transfer such positions to a buyer.
As of December 31, 2017, the Company estimated the aggregate remaining recovery value for the Private Equity / Principal Investments portfolio at $104 million. Between October 5, 2017 and December 31, 2017, the Company (i) monetized $14 million of inventory, and (ii) increased the estimated recovery value for the portfolio by $4 million.
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Quarterly Financial Report as of December 31, 2017 (Unaudited)
Note 5 – Financial Instruments and Other Inventory Positions(continued)
Derivative Assets and Derivative Liabilities
Derivative assets and Derivative liabilities represent amounts due from/to counterparties related to matured, terminated and open trades, and are recorded at expected recovery/claim amounts, net of cash and securities collateral.
The Company’s estimated recovery values for Derivative assets and claim amounts are determined using internal and third party valuation models and data sources, internal assessments, valuation assumptions asserted by counterparties, certain assumptions regarding contract provisions, and management judgment.
For derivative litigation actions which may result in a potential recovery to the Company (“Affirmative Litigations”), the largest of which are listed and described inNote 12 – Legal Proceedings, estimated recoveries are recorded at zero unless one of the following conditions are met:
| (i) | The Company has reached agreements in principle with the corresponding counterparties, in which case the recovery value is recorded at the agreed amounts; or |
| (ii) | The Company has locked in value by purchasing notes of various special purpose vehicles, in which case the Balance Sheets reflect estimated recovery values at the value locked in. |
Derivative claims are recorded in Liabilities Subject to Compromise as follows:
| (i) | Resolved claims are recorded at values agreed by the Company; and |
| (ii) | Unresolved claims are recorded at amounts estimated to be allowed by the Company. |
Derivative claims recorded by LBSF include LBSF’s obligations under the RACERS swaps (refer to Section IV.I.b of the Disclosure Statement).
As of December 31, 2017, the Company estimated the aggregate remaining recovery value for the Derivatives portfolio at $50 million. Between October 5, 2017 and December 31, 2017, the Company collected $39 million primarily as a result of settlements related to special purpose vehicles. As these settlements relate to derivative litigation actions, the estimated recoveries for these matters had been recorded at zero in prior Quarterly Financial Reports.
As of December 31, 2017, the Company estimated aggregate Derivative liabilities, before any distributions, at $23.5 billion.
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Quarterly Financial Report as of December 31, 2017 (Unaudited)
Note 6 – Receivables from Debtors and Debtor-Controlled Entities and Other Assets
Receivables from Debtors and Debtor-Controlled Entities and Other Assets includes: (i) $1.4 billion related to certain post-petition activities between and among Debtors and Debtor-Controlled Entities, with the corresponding liabilities reflected in Payables to Debtors and Debtor-Controlled Entities and Other Liabilities, and (ii) $375 million of other assets.
The following table summarizes the main components of Receivables from Debtors and Debtor-Controlled Entities and Other Assets as of December 31, 2017:
| Debtors | Debtor- | Total Debtors and Debtor- | ||||||||||||||||||||||||||
| $ in millions | LBHI | LCPI | LBSF | Other Debtors | Total | Controlled Entities | Controlled Entities | |||||||||||||||||||||
Secured Notes (1) | $ | — | $ | — | $ | — | $ | 1,224 | $ | 1,224 | $ | 69 | $ | 1,293 | ||||||||||||||
Fundings and other activites(2) | 45 | 0 | 0 | 4 | 49 | 22 | 71 | |||||||||||||||||||||
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Receivables from Debtors and Debtor-Controlled Entities | 45 | 0 | 0 | 1,228 | 1,273 | 91 | 1,364 | |||||||||||||||||||||
Receivable related to Fenway(3) | 79 | — | — | — | 79 | — | 79 | |||||||||||||||||||||
Affiliate Claims (4) | 141 | — | 10 | 0 | 151 | 0 | 152 | |||||||||||||||||||||
Receivable from Brookfield(5) | 52 | — | — | — | 52 | — | 52 | |||||||||||||||||||||
Other | 19 | 0 | (0 | ) | 0 | 20 | 73 | 93 | ||||||||||||||||||||
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Total Other Assets | 291 | 0 | 10 | 1 | 302 | 73 | 375 | |||||||||||||||||||||
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Total Receivables from Debtors and Debtor-Controlled Entities and Other Assets | $ | 336 | $ | 0 | $ | 10 | $ | 1,228 | $ | 1,575 | $ | 164 | $ | 1,739 | ||||||||||||||
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| (1) | Includes: |
| (i) | loans to LBHI from LOTC of $488 million, LBCC of $128 million, and a Debtor-Controlled Entity of $69 million, secured by LBHI assets; |
| (ii) | loans to LCPI from LBFP of $242 million, LBCC of $145 million, and LBDP of $168 million, secured by LCPI assets; and |
| (iii) | a loan to LBSF from LBCC of $53 million, secured by LBSF assets. |
| (2) | Includes $45 million primarily related to fundings (e.g. capital calls) by LBHI and cost allocations. |
| (3) | Represents unsecured claims asserted by LBHI against LCPI based on the Fenway transactions, as disclosed in Section 6.5(h) of the Plan, net of $151 million of payments received by LBHI as a result of Plan Distributions. |
| (4) | Represents $152 million of affiliate claims acquired through settlements with third parties valued at estimated recoveries, net of distributions. The largest components of Affiliate Claims at the admitted claim amounts, prior to distributions, are shown below: |
in millions | Local Currency | Admitted Claims in Local Currency | ||||||
Lehman Brothers Finance S.A. | CHF | 719 | ||||||
Lehman Brothers Limited | GBP | 65 | ||||||
Storm Funding Ltd | GBP | 1,783 | ||||||
Lehman Brothers International (Europe) | GBP | 27 | ||||||
| (5) | Represents a receivable from Brookfield that was recorded as a result of the Lehman Brothers U.K. Holdings (Delaware) Inc. (“LUK”) and Lehman Pass-Through Securities Inc. (“LPTSI”) Sale in August 2017. Refer toNote 7 – Investments in Affiliates,LUK and LPTSI Stock and Note Sale, for additional information on the sale. |
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Quarterly Financial Report as of December 31, 2017 (Unaudited)
Note 6 – Receivables from Debtors and Debtor-Controlled Entities and Other Assets(continued)
Cost Allocations
Expenses related to obligations for certain administrative services and bankruptcy related costs are generally paid by LBHI then allocated on a quarterly basis to Debtor andDebtor-Controlled Entities with material remaining inventory and/or unresolved claims. A revised methodology for allocating expenses was implemented for expenses disbursed beginning April 1, 2012 (the “Post-Effective Methodology”). ThePost-Effective Methodology categorizes and allocates administrative expenses as follows:
| (i) | Costs directly attributable to specific legal entities, such as dedicated staff costs and professional fees associated with assets or legal matters which benefit specific legal entities, are directly assigned to the corresponding legal entities; |
| (ii) | Costs attributable to the support and management of specific asset and claim portfolios, such as asset management and claim staff, professional fees and technology costs to support the asset and claim portfolios, are allocated among legal entities based on the (a) pro rata ownership of inventory within each asset portfolio, and (b) pro rata claims for certain claim categories; |
| (iii) | Costs associated with general claims mitigation, distributions, and other bankruptcy-related activities are allocated among Debtors based on outstanding unresolved claims and cumulative distributions; and |
| (iv) | All remaining administrative costs are allocated among Debtors based on outstanding unresolved claims and estimated future distributions. |
The Company continually reviews the methodology for allocating costs, and adjustments are reflected in the Balance Sheets.
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Quarterly Financial Report as of December 31, 2017 (Unaudited)
Note 7 – Investments in Affiliates
Investments in Debtor-Controlled Entities are recorded in the Balance Sheets at book values. Investments inDebtor-Controlled Entities that have incurred cumulative net operating losses in excess of capital contributions are shown as negative amounts.
The earnings or losses of (i) Debtors owned by other Debtors (e.g. LBCS is a direct subsidiary of LBSF) or Debtor-Controlled Entities (e.g. LCPI is a direct subsidiary of Lehman ALI Inc. (“ALI”)), and (ii) Debtor-Controlled Entities owned by Debtors (e.g. ALI is a direct subsidiary of LBHI) are not eliminated in the Balance Sheets, and as a result, Investments in Affiliates reflect the earnings or losses of Debtors and certain Debtor-Controlled Entities more than once.
Adjustments to Investments in Affiliates may be required in future Balance Sheets (including write-downs and write-offs), as amounts ultimately realized may vary materially from amounts reflected on the Balance Sheets herein.
Debtor-Controlled Entities – Aurora Commercial Corp.
The investment in Aurora Commercial Corp. (formerly known as Aurora Bank FSB) (“Aurora”), a wholly-owned subsidiary of Lehman Brothers Bancorp Inc. (“LBB”), which is a wholly owned subsidiary of LBHI, is reflected in LBB’s Balance Sheets on a consolidated basis.
Aurora is a party to various litigation matters, primarily matters in which various counterparties have asserted claims against Aurora arising out of Aurora’s mortgage servicing operations. Aurora establishes accruals for loss contingencies as it becomes probable that a loss will be incurred and the amount of that loss can be estimated.
The ultimate recovery value for Aurora, which may vary materially from the amount reflected on the Balance Sheets due to significant costs related to litigation, wind down and other potential liabilities, may be adjusted (including write-downs and write-offs) in future Balance Sheets.
Non-Controlled Affiliates
All investments inNon-Controlled Affiliates were written off in 2011 as the Company deemed recovery on these equity investments unlikely to occur due to
the bankruptcy proceedings of these entities in their local jurisdictions.
LUK and LPTSI Stock and Note Sale
Pursuant to an agreement among LBHI, LPTSI, LUK, and Brookfield Asset Management Inc. and certain of its affiliates (“Brookfield”), on August 10, 2017, (the “LUK and LPTSI Sale”) Brookfield acquired from LBHI (i) 45% of LBHI’s equity in LUK and LTPSI and (ii) approximately $225 million in unsecured receivables from LUK and LPTSI. The agreement provided for, among other things, payment to LBHI of $485 million, up to an additional $80 million of contingent, deferred consideration based on LUK’s future collection on LUK’s claims against aNon-Controlled Affiliate, and the transfer to LBHI of LUK’s claims against theNon-Controlled Affiliate under certain circumstances. LUK and LPTSI each hold a portfolio of investment assets, including but not limited to, interests in commercial real estate, private equity investments, and receivables from affiliates.
In August 2017, LBHI received the $485 million.
In September 2017, LBHI received $28 million of the maximum $80 million contingent, deferred consideration.
The investment in LUK and LPTSI of approximately $420 million is recorded in Investments in Affiliates, which reflects the anticipated future recoveries from LBHI’s remaining 55% equity interests.
On August 31, 2017, LUK and LPTSI each filed a chapter 11 petition in the Bankruptcy Court. In January 2018, each party holding claims or interests in the voting classes voted to accept the Joint Chapter 11 Plan of Lehman Brothers U.K. Holdings (Delaware) Inc. and Lehman Pass-Through Securities Inc. (the “LUK and LPTSI Plan”).
On March 8, 2018, the Bankruptcy Court approved the LUK and LPTSI Plan and the two entities successfully emerged from chapter 11. Additional information and filings in the case can be found at www.lehman-docket.com in the “Related Debtors Information” section.
As a result of LUK and LPTSI’s emergence from bankruptcy, LBHI converted its equity interests to preferred stock in each company. On March 15, 2018, LBHI redeemed approximately $343 million of preferred stock thereby reducing its investment in LUK and LPTSI.
Page 12
Quarterly Financial Report as of December 31, 2017 (Unaudited)
Note 8 – Due from/to Affiliates
Due from/to Affiliates represents (i) receivables related to transactions among Debtors,Debtor-Controlled Entities andNon-Controlled Affiliates (separately or collectively, “Affiliates”), and (ii) payables byDebtor-Controlled Entities to Debtors andNon-Controlled Affiliates. Certain balances are reflected in “Due from” and “Due to” as a result of the assignments of claims against the Debtor and therefore are not netted.
Due from/to Affiliates are recorded in the Balance Sheets at book values, and where applicable, these balances are recorded net of cash distributions. The Balance Sheets do not reflect potential realization or collectability reserves for Due from Affiliates balances nor estimates of potential additional payables to Affiliates. As a result, adjustments (includingwrite-downs and write-offs) to Due from/to Affiliates, which are material, will be recorded in future Balance Sheets.
Page 13
Quarterly Financial Report as of December 31, 2017 (Unaudited)
Note 8 – Due from/to Affiliates(continued)
(a) Intercompany Balances Among Debtors and Debtor-Controlled Entities
The table below presents the Due from/to Debtors and Debtor-Controlled Entities balances as of December 31, 2017, and the related activity since the previously filed Quarterly Financial Report as of October 5, 2017:
| Activity 10/6/17—12/31/17 | ||||||||||||||||||||||||
| $ in millions | As of October 5, 2017 | Cash Receipts | Cash Distributions | Plan Related Adjustments | Debt Forgiveness / Other | As of December 31, | ||||||||||||||||||
Due From Controlled | ||||||||||||||||||||||||
Debtors: | ||||||||||||||||||||||||
Lehman Brothers Holdings Inc. | $ | 19,847 | $ | (505 | ) | $ | — | $ | (1 | ) | $ | (97 | ) | $ | 19,245 | |||||||||
Lehman Commercial Paper Inc. | 5,274 | (49 | ) | — | (1 | ) | 0 | 5,224 | ||||||||||||||||
Lehman Brothers Special Financing Inc. | 424 | (6 | ) | — | (1 | ) | (0 | ) | 417 | |||||||||||||||
Other Debtors | 484 | (8 | ) | — | (2 | ) | (77 | ) | 397 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Subtotal Debtors | 26,029 | (568 | ) | — | (3 | ) | (174 | ) | 25,284 | |||||||||||||||
Debtor-Controlled | 2,449 | (37 | ) | — | — | 0 | 2,412 | |||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | $ | 28,479 | $ | (605 | ) | $ | — | $ | (3 | ) | $ | (174 | ) | $ | 27,696 | |||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Due To Controlled(1) | ||||||||||||||||||||||||
Debtors: | ||||||||||||||||||||||||
Lehman Brothers Holdings Inc. | $ | 3,927 | $ | — | $ | (59 | ) | $ | — | $ | 0 | $ | 3,867 | |||||||||||
Lehman Commercial Paper Inc. | 3,017 | — | (60 | ) | (1 | ) | 0 | 2,955 | ||||||||||||||||
Lehman Brothers Special Financing Inc. | 10,525 | — | (396 | ) | (2 | ) | 0 | 10,127 | ||||||||||||||||
Other Debtors | 429 | — | (18 | ) | (0 | ) | (0 | ) | 411 | |||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Subtotal Debtors | 17,902 | — | (534 | ) | (3 | ) | 1 | 17,360 | ||||||||||||||||
Debtor-Controlled | 10,443 | — | (38 | ) | — | (174 | ) | 10,231 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | $ | 28,345 | $ | — | $ | (572 | ) | $ | (3 | ) | $ | (173 | ) | $ | 27,592 | |||||||||
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| |||||||||||||
| (1) | “Due to Controlled” from Debtors balances are reflected in Liabilities Subject to Compromise on the December 31, 2017 Balance Sheets. |
Page 14
Quarterly Financial Report as of December 31, 2017 (Unaudited)
Note 8 – Due from/to Affiliates(continued)
(a) Intercompany Balances Among Debtors and Debtor-Controlled Entities (continued)
The following table presents a summary of Due from/to Debtors and Debtor-Controlled Entities for Debtors as of December 31, 2017:
| LBHI | LBSF | LCPI | Other Debtors | Total Debtors | ||||||||||||||||||||||||||||||||||||
| $ in millions | Due from | Due to | Due from | Due to | Due from | Due to | Due from | Due to | Due from | Due to | ||||||||||||||||||||||||||||||
Lehman Brothers Holdings Inc | $ | — | $ | — | $ | 173 | $ | (9,774 | ) | $ | 806 | $ | (2,663 | ) | $ | 28 | $ | (191 | ) | $ | 1,006 | $ | (12,628 | ) | ||||||||||||||||
LB Special Financing Inc | 9,774 | (173 | ) | — | — | 93 | (182 | ) | 260 | (53 | ) | 10,127 | (408 | ) | ||||||||||||||||||||||||||
Lehman Commercial Paper Inc | 2,663 | (806 | ) | 182 | (93 | ) | — | — | 110 | (145 | ) | 2,955 | (1,044 | ) | ||||||||||||||||||||||||||
Structured Asset Securities Corp | 64 | — | — | — | — | (110 | ) | — | — | 64 | (110 | ) | ||||||||||||||||||||||||||||
LB Commodity Services Inc | 59 | (0 | ) | — | (260 | ) | — | (0 | ) | — | (0 | ) | 59 | (260 | ) | |||||||||||||||||||||||||
LB Commercial Corporation | 68 | (20 | ) | 53 | — | 145 | — | 0 | — | 266 | (20 | ) | ||||||||||||||||||||||||||||
LB OTC Derivatives Inc | 0 | — | 0 | — | — | — | — | — | 0 | — | ||||||||||||||||||||||||||||||
Other Debtors | 0 | (7 | ) | 0 | — | — | — | 0 | (0 | ) | 0 | (7 | ) | |||||||||||||||||||||||||||
RACERS Claims(1) | 576 | — | — | — | — | — | — | — | 576 | — | ||||||||||||||||||||||||||||||
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| |||||||||||||||||||||
Total Debtors | $ | 13,204 | $ | (1,006 | ) | $ | 408 | $ | (10,127 | ) | $ | 1,044 | $ | (2,955 | ) | $ | 397 | $ | (389 | ) | $ | 15,053 | $ | (14,477 | ) | |||||||||||||||
Lehman Ali Inc: | ||||||||||||||||||||||||||||||||||||||||
Lehman Ali Inc (PCO) | — | (2,340 | ) | — | — | 2,393 | — | 0 | — | 2,393 | (2,340 | ) | ||||||||||||||||||||||||||||
LB I Group Inc: | ||||||||||||||||||||||||||||||||||||||||
LB I Group Inc (PCO) | 1,548 | — | 6 | — | 43 | — | (0 | ) | — | 1,597 | — | |||||||||||||||||||||||||||||
LB Offshore Partners Ltd | 347 | — | — | — | 1 | — | 0 | — | 348 | — | ||||||||||||||||||||||||||||||
DL Mortgage Corp | — | 0 | 0 | — | 747 | — | — | — | 748 | 0 | ||||||||||||||||||||||||||||||
314 Commonwealth Ave Inc: | ||||||||||||||||||||||||||||||||||||||||
314 Commonwealth Ave Inc (PCO) | 785 | 0 | — | — | — | — | — | 0 | 785 | 0 | ||||||||||||||||||||||||||||||
Other: | ||||||||||||||||||||||||||||||||||||||||
Pami Ali LLC | 1,785 | (60 | ) | 1 | — | 997 | — | — | — | 2,782 | (60 | ) | ||||||||||||||||||||||||||||
Luxembourg Finance S.a.r.l. | 167 | — | — | — | — | — | — | — | 167 | — | ||||||||||||||||||||||||||||||
Real Estate Private Equity Inc | 628 | — | — | — | — | — | — | — | 628 | — | ||||||||||||||||||||||||||||||
SMF No.1 Limited | 198 | — | — | — | — | — | — | — | 198 | — | ||||||||||||||||||||||||||||||
Repe LBREP LP, LLC | 185 | — | — | — | — | — | — | — | 185 | — | ||||||||||||||||||||||||||||||
Lehman Brothers Global Services Inc. | 49 | — | — | — | — | — | — | — | 49 | — | ||||||||||||||||||||||||||||||
Claims held by third parties(2) | — | (451 | ) | — | — | — | — | — | (20 | ) | — | (471 | ) | |||||||||||||||||||||||||||
Other | 350 | (11 | ) | 1 | — | — | — | — | (2 | ) | 351 | (12 | ) | |||||||||||||||||||||||||||
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|
|
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| |||||||||||||||||||||
Total Debtor-Controlled Entities | $ | 6,041 | $ | (2,861 | ) | $ | 9 | $ | — | $ | 4,180 | $ | — | $ | 0 | $ | (22 | ) | $ | 10,231 | $ | (2,883 | ) | |||||||||||||||||
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|
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|
| |||||||||||||||||||||
Total | $ | 19,245 | �� | $ | (3,867 | ) | $ | 417 | $ | (10,127 | ) | $ | 5,224 | $ | (2,955 | ) | $ | 397 | $ | (411 | ) | $ | 25,284 | $ | (17,360 | ) | ||||||||||||||
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| |||||||||||||||||||||
“PCO” – parent company only
| (1) | Refer to Section IV.I.b of the Disclosure Statement for further information on the RACERS Claims. |
| (2) | “Claims held by third parties” represent claims, net of distributions, originally held by LUK. |
Page 15
Quarterly Financial Report as of December 31, 2017 (Unaudited)
Note 8 – Due from/to Affiliates(continued)
(a) Intercompany Balances Among Debtors and Debtor-Controlled Entities (continued)
The following table presents a summary of Due from/to Affiliates balances for Debtor-Controlled Entities as of December 31, 2017:
| Lehman ALI Inc. | LB I Group Inc. | 314 Commonwealth Ave. Inc. | Other Debtor- Controlled Entities | |||||||||||||||||||||||||||||
| $ in millions | Due from | Due to | Due from | Due to | Due from | Due to | Due from | Due to | ||||||||||||||||||||||||
|
| |||||||||||||||||||||||||||||||
Debtors: | ||||||||||||||||||||||||||||||||
Lehman Brothers Holdings Inc. | $ | 2,340 | $ | (0 | ) | $ | (0 | ) | $ | (1,895 | ) | $ | (0 | ) | $ | (785 | ) | $ | 71 | $ | (3,281 | ) | ||||||||||
Lehman Commercial Paper Inc. | — | (2,393 | ) | — | (791 | ) | — | — | — | (997 | ) | |||||||||||||||||||||
Lehman Brothers Special Financing Inc. | — | — | — | (7 | ) | — | — | (0 | ) | (1 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Total Debtors | $ | 2,340 | $ | (2,393 | ) | $ | (0 | ) | $ | (2,693 | ) | $ | (0 | ) | $ | (785 | ) | $ | 71 | $ | (4,278 | ) | ||||||||||
Debtor-Controlled: | ||||||||||||||||||||||||||||||||
314 Commonwealth Ave Inc | $ | 45 | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||||||||
Lehman Ali Inc(1) | — | — | 0 | — | — | (45 | ) | 216 | — | |||||||||||||||||||||||
Real Estate Private Equity Inc(1) | — | — | — | — | — | — | 218 | (2 | ) | |||||||||||||||||||||||
LB I Group Inc. | — | — | — | — | — | — | — | (325 | ) | |||||||||||||||||||||||
Pami ALI LLC | — | (216 | ) | 297 | — | — | — | 1 | (218 | ) | ||||||||||||||||||||||
Other | — | (0 | ) | 28 | (25 | ) | 0 | 0 | 4 | (59 | ) | |||||||||||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Total Debtor-Controlled Entities | $ | 45 | $ | (216 | ) | $ | 325 | $ | (25 | ) | $ | 0 | $ | (45 | ) | $ | 438 | $ | (603 | ) | ||||||||||||
|
|
|
|
|
|
|
| |||||||||||||||||||||||||
Total | $ | 2,384 | $ | (2,608 | ) | $ | 325 | $ | (2,718 | ) | $ | (0 | ) | $ | (830 | ) | $ | 509 | $ | (4,881 | ) | |||||||||||
|
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|
|
|
|
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| |||||||||||||||||||||||||
Non-Controlled Affiliates:(2) | ||||||||||||||||||||||||||||||||
Lehman Brothers ODC 1 Ltd | — | — | — | — | — | — | 95 | — | ||||||||||||||||||||||||
LB UK RE Holdings Limited | — | — | — | — | 7 | — | — | — | ||||||||||||||||||||||||
Other | 0 | — | 0 | (1 | ) | — | — | 38 | (26 | ) | ||||||||||||||||||||||
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| |||||||||||||||||||||||||
Total | $ | 0 | $ | — | $ | 0 | $ | (1 | ) | $ | 7 | $ | — | $ | 132 | $ | (26 | ) | ||||||||||||||
|
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|
|
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| |||||||||||||||||||||||||
| (1) | “Due from” balances at Other Debtor-Controlled Entities are related to receivables recorded by Pami ALI LLC. |
| (2) | Certain “Due from” balances are recorded in the local currency of the respectiveNon-Controlled Affiliates and as a result, balances may fluctuate as a result of changes in foreign exchange rates. Due from/to Affiliates balances include both settled and unresolved balances withNon-Controlled Affiliates. |
Page 16
Quarterly Financial Report as of December 31, 2017 (Unaudited)
Note 8 – Due from/to Affiliates(continued)
(b) Intercompany balances among Debtors and Debtor-Controlled Entities andNon-Controlled Affiliates
The table below presents the Due from/toNon-Controlled Affiliates balances as of December 31, 2017, and the related activity since the previously filed Quarterly Financial Report as of October 5, 2017:
| Activity 10/6/17 - 12/31/17 | ||||||||||||||||||||||||
| $ in millions | As of October 5, 2017 | Cash Receipts | Cash Distributions | Plan Related Adjustments | Other (1) | As of December 31, 2017 | ||||||||||||||||||
Due FromNon-Controlled | ||||||||||||||||||||||||
Debtors: | ||||||||||||||||||||||||
Lehman Brothers Holdings Inc. | $ | 17,182 | $ | (44 | ) | $ | — | $ | — | $ | (274 | ) | $ | 16,864 | ||||||||||
Lehman Commercial Paper Inc. | 135 | — | — | — | (0 | ) | 135 | |||||||||||||||||
Lehman Brothers Special Financing Inc. | 694 | (10 | ) | — | — | (0 | ) | 684 | ||||||||||||||||
Other Debtors | 267 | (1 | ) | — | — | (0 | ) | 265 | ||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Subtotal Debtors | 18,278 | (55 | ) | — | — | (274 | ) | 17,949 | ||||||||||||||||
Debtor-Controlled | 215 | (2 | ) | — | — | (75 | ) | 139 | ||||||||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | $ | 18,493 | $ | (57 | ) | $ | — | $ | — | $ | (349 | ) | $ | 18,088 | ||||||||||
|
|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Due ToNon-Controlled(2) | ||||||||||||||||||||||||
Debtors: | ||||||||||||||||||||||||
Lehman Brothers Holdings Inc. | $ | 32,703 | $ | — | $ | (489 | ) | $ | — | $ | 0 | $ | 32,214 | |||||||||||
Lehman Commercial Paper Inc. | 495 | — | (9 | ) | (1 | ) | 6 | 490 | ||||||||||||||||
Lehman Brothers Special Financing Inc. | 957 | — | (25 | ) | (1 | ) | 0 | 930 | ||||||||||||||||
Other Debtors | 1 | — | (0 | ) | (0 | ) | (0 | ) | 1 | |||||||||||||||
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|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Subtotal Debtors | 34,151 | — | (523 | ) | (2 | ) | 6 | 33,636 | ||||||||||||||||
Debtor-Controlled | 27 | — | — | — | 0 | 27 | ||||||||||||||||||
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|
|
|
|
|
|
|
|
|
|
| |||||||||||||
Total | $ | 34,178 | $ | — | $ | (523 | ) | $ | (2 | ) | $ | 6 | $ | 33,663 | ||||||||||
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|
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|
|
|
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| |||||||||||||
| (1) | Other primarily includes the write off of (i) a subordinated debt claim against LB Asia Pacific (Singapore) PTE of $366 million, and (ii) an interest receivable against Lehman Brothers Holdings Intermediate 2 Ltd of $77 million, partially offset by the positive impact of movements in foreign exchange rates of approximately $100 million. |
| (2) | “Due toNon-Controlled” balances from Debtors are included in Liabilities Subject to Compromise herein. |
Page 17
Quarterly Financial Report as of December 31, 2017 (Unaudited)
Note 8 – Due from/to Affiliates (continued)
(b) Intercompany balances among Debtors and Debtor-Controlled Entities andNon-Controlled Affiliates (continued)
The following table presents a summary of Due from/toNon-Controlled Affiliates for Debtors as of December 31, 2017:
| LBHI | LBSF | LCPI | Other Debtors | Total Debtors | ||||||||||||||||||||||||||||||||||||
| $ in millions | Due from | Due to | Due from | Due to | Due from | Due to | Due from | Due to | Due from | Due to | ||||||||||||||||||||||||||||||
Europe | ||||||||||||||||||||||||||||||||||||||||
Lehman Brothers Treasury Co B.V.(1) | $ | 2,100 | $ | (22,305 | ) | $ | 655 | $ | — | $ | — | $ | — | $ | 103 | $ | — | $ | 2,858 | $ | (22,305 | ) | ||||||||||||||||||
Lehman Brothers Finance S.A. | 8,654 | (617 | ) | — | — | — | — | — | — | 8,654 | (617 | ) | ||||||||||||||||||||||||||||
Lehman Brothers Bankhaus A.G. | 36 | — | — | 0 | — | — | 1 | — | 37 | 0 | ||||||||||||||||||||||||||||||
LB UK RE Holdings Limited | 650 | — | — | — | — | — | — | — | 650 | — | ||||||||||||||||||||||||||||||
Lehman Brothers (Luxembourg) S.A. | 349 | — | — | — | — | — | — | — | 349 | — | ||||||||||||||||||||||||||||||
Thayer Properties Limited | 184 | — | — | — | — | (0 | ) | — | — | 184 | (0 | ) | ||||||||||||||||||||||||||||
LB (PTG) Ltd | 125 | — | — | — | — | — | — | — | 125 | — | ||||||||||||||||||||||||||||||
LB (Luxembourg) Equity Finance S.A | 34 | — | — | — | — | — | — | — | 34 | — | ||||||||||||||||||||||||||||||
Longmeade Limited | 8 | — | — | — | — | (51 | ) | — | — | 8 | (51 | ) | ||||||||||||||||||||||||||||
LB RE Financing No.2 Limited | 0 | — | — | — | — | — | — | — | 0 | — | ||||||||||||||||||||||||||||||
Lehman Brothers Limited | — | (236 | ) | — | (2 | ) | — | (1 | ) | — | (0 | ) | — | (239 | ) | |||||||||||||||||||||||||
Lehman Brothers International (Europe)(2) | — | (666 | ) | — | (533 | ) | — | — | — | — | — | (1,199 | ) | |||||||||||||||||||||||||||
Eldon Street Holdings Limited | — | (415 | ) | — | — | — | (0 | ) | — | (0 | ) | — | (415 | ) | ||||||||||||||||||||||||||
LB RE Financing No.3 Limited | 442 | — | — | — | — | — | — | — | 442 | — | ||||||||||||||||||||||||||||||
LB Holdings Intermediate 2 Ltd | — | (199 | ) | — | — | — | — | — | — | — | (199 | ) | ||||||||||||||||||||||||||||
Wood Street Investments Ltd | — | (179 | ) | — | — | — | — | — | — | — | (179 | ) | ||||||||||||||||||||||||||||
Storm Funding Ltd | — | (97 | ) | — | (3 | ) | — | (33 | ) | — | — | — | (133 | ) | ||||||||||||||||||||||||||
Asia | ||||||||||||||||||||||||||||||||||||||||
Sunrise Finance Co. Ltd | 996 | (18 | ) | — | (13 | ) | — | (0 | ) | — | (0 | ) | 996 | (32 | ) | |||||||||||||||||||||||||
LB Commercial Corp. Asia Limited | 768 | — | — | — | — | (1 | ) | — | — | 768 | (1 | ) | ||||||||||||||||||||||||||||
Lehman Brothers Holdings Japan Inc. | 834 | (30 | ) | — | — | — | — | — | — | 834 | (30 | ) | ||||||||||||||||||||||||||||
LB Asia Pacific (Singapore) PTE | 278 | — | — | — | — | — | — | — | 278 | — | ||||||||||||||||||||||||||||||
Lehman Brothers Japan Inc. | 353 | (75 | ) | — | (125 | ) | — | — | 14 | 0 | 367 | (200 | ) | |||||||||||||||||||||||||||
LB Asia Capital Company | 342 | — | 29 | — | 133 | — | 147 | — | 651 | — | ||||||||||||||||||||||||||||||
LB Investments PTE Ltd | 254 | — | — | — | — | — | — | — | 254 | — | ||||||||||||||||||||||||||||||
LB Securities Asia Limited | 0 | (5 | ) | — | — | — | — | — | — | 0 | (5 | ) | ||||||||||||||||||||||||||||
Other | ||||||||||||||||||||||||||||||||||||||||
Claims held by third parties(3) | — | (7,185 | ) | — | (185 | ) | — | (385 | ) | — | (0 | ) | — | (7,755 | ) | |||||||||||||||||||||||||
Other | 457 | (187 | ) | 0 | (68 | ) | 2 | (20 | ) | — | (1 | ) | 459 | (277 | ) | |||||||||||||||||||||||||
|
|
|
|
|
|
|
|
|
| |||||||||||||||||||||||||||||||
Total | $ | 16,864 | $ | (32,214 | ) | $ | 684 | $ | (930 | ) | $ | 135 | $ | (490 | ) | $ | 265 | $ | (1 | ) | $ | 17,949 | $ | (33,636 | ) | |||||||||||||||
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| |||||||||||||||||||||||||||||||
| (1) | LBT is included in the defined term“Non-Controlled Affiliates,” but LBHI has no direct or indirect equity interest in LBT. |
| (2) | LBHI owns allowed claims against LBIE in the aggregate face amount of £357 million. |
Page 18
Quarterly Financial Report as of December 31, 2017 (Unaudited)
Note 8 – Due from/to Affiliates(continued)
(b) Intercompany balances among Debtors and Debtor-Controlled Entities andNon-Controlled Affiliates (continued)
| (3) | “Claims held by third parties” represent claims, net of distributions, originally held byNon-Controlled Affiliates, according to their respective settlement agreements with the Company, that are currently held by third parties, including: |
| ($ in millions) | ||||||||||||||||
| Original creditor | LBHI | LBSF | LCPI | Total | ||||||||||||
Lehman Brothers Bankhaus A.G. | $ | (4,835 | ) | $ | (105 | ) | $ | (257 | ) | $ | (5,196 | ) | ||||
Lehman Brothers Securities NV | (496 | ) | (44 | ) | — | (541 | ) | |||||||||
Storm Funding Ltd | (514 | ) | — | — | (514 | ) | ||||||||||
LB Asia Capital Company | (401 | ) | — | — | (401 | ) | ||||||||||
Lehman Re Limited | (280 | ) | (15 | ) | (87 | ) | (382 | ) | ||||||||
LB Securities Asia Limited | (127 | ) | — | — | (127 | ) | ||||||||||
Lehman Brothers Asia Limited | (120 | ) | — | — | (120 | ) | ||||||||||
Lehman Brothers Futures Asia Limited | (56 | ) | — | — | (56 | ) | ||||||||||
Lehman Brothers Asia Holdings Limited | — | (21 | ) | (41 | ) | (62 | ) | |||||||||
LB (Luxembourg) Equity Finance S.A. | (87 | ) | — | — | (87 | ) | ||||||||||
Lehman Brothers International (Europe) | (55 | ) | — | — | (55 | ) | ||||||||||
Other | (215 | ) | (1 | ) | — | (215 | ) | |||||||||
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Total Claims held by third parties | $ | (7,185 | ) | (185 | ) | (385 | ) | $ | (7,755 | ) | ||||||
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The following table presents, on an aggregate basis for Debtors and Debtor-Controlled Entities, admitted claims, receivables, and collections to date fromNon-Controlled Affiliates:
| $ in millions | Local Currency | Admitted Claims in Local Currency | Collections To Date in Local Currency (3) | Admitted and Unsettled Filed Claims in USD(4) | Collections To Date in USD(3) | Net Receivables in USD | ||||||||||||||||||
Europe | ||||||||||||||||||||||||
Lehman Brothers Finance S.A. | CHF | 9,582 | (1,168 | ) | 9,852 | (1,198 | ) | 8,654 | ||||||||||||||||
Lehman Brothers Treasury Co B.V. | USD | 4,342 | (1,559 | ) | 4,342 | (1,559 | ) | 2,782 | ||||||||||||||||
Lehman Brothers Treasury Co B.V.(1) | Various | — | — | 113 | (37 | ) | 76 | |||||||||||||||||
Lehman Brothers Bankhaus A.G. | EUR | 203 | (202 | ) | 243 | (243 | ) | 1 | ||||||||||||||||
Lehman Brothers Bankhaus A.G. - Assigned(2) | EUR | 9,383 | (9,353 | ) | 11,269 | (11,233 | ) | 36 | ||||||||||||||||
LB UK RE Holdings Limited | GBP | 1,188 | (702 | ) | 1,606 | (949 | ) | 657 | ||||||||||||||||
Lehman Brothers (Luxembourg) S.A. | EUR | 759 | (468 | ) | 912 | (563 | ) | 349 | ||||||||||||||||
Lehman Brothers International (Europe) | GBP | 359 | (359 | ) | 488 | (488 | ) | — | ||||||||||||||||
LB RE Financing No.3 Limited | GBP | 353 | (27 | ) | 478 | (36 | ) | 442 | ||||||||||||||||
LB Commercial Mortgage Conduit Ltd | GBP | 240 | (222 | ) | 324 | (300 | ) | 24 | ||||||||||||||||
Thayer Properties Limited | GBP | 172 | (36 | ) | 232 | (48 | ) | 184 | ||||||||||||||||
LB (PTG) Ltd | GBP | 170 | (78 | ) | 230 | (105 | ) | 125 | ||||||||||||||||
Lehman Brothers Holdings Plc | GBP | 57 | (26 | ) | 78 | (35 | ) | 42 | ||||||||||||||||
LB (Luxembourg) Equity Finance S.A | EUR | 96 | (67 | ) | 115 | (80 | ) | 34 | ||||||||||||||||
Longmeade Limited | GBP | 43 | (18 | ) | 58 | (24 | ) | 34 | ||||||||||||||||
Asia | ||||||||||||||||||||||||
Sunrise Finance Co. Ltd | JPY | 234,022 | (121,815 | ) | 2,078 | (1,082 | ) | 996 | ||||||||||||||||
Lehman Brothers Holdings Japan Inc. | JPY | 178,617 | (84,635 | ) | 1,586 | (751 | ) | 834 | ||||||||||||||||
LB Asia Capital Company | HKD | 6,398 | (1,312 | ) | 819 | (168 | ) | 651 | ||||||||||||||||
LB Asia Pacific (Singapore) PTE | USD | 622 | (343 | ) | 621 | (343 | ) | 278 | ||||||||||||||||
LB Asia Pacific (Singapore) PTE | SGD | 1 | — | 0 | — | 0 | ||||||||||||||||||
LB Commercial Corp. Asia Limited | HKD | 14,769 | (8,771 | ) | 1,890 | (1,123 | ) | 768 | ||||||||||||||||
LB Investments PTE Ltd | USD | 543 | (289 | ) | 543 | (289 | ) | 254 | ||||||||||||||||
LB Securities Asia Limited | HKD | 3,177 | (3,177 | ) | 407 | (407 | ) | 0 | ||||||||||||||||
Lehman Brothers Japan Inc. | JPY | 316,193 | (274,852 | ) | 2,807 | (2,440 | ) | 367 | ||||||||||||||||
GKI Development Inc. | KRW | 103,363 | (91,427 | ) | 97 | (86 | ) | 11 | ||||||||||||||||
Lehman Brothers Australia Ltd | AUD | 111 | (66 | ) | 87 | (52 | ) | 35 | ||||||||||||||||
Sail Investor PTE Ltd | USD | 63 | (60 | ) | 63 | (60 | ) | 3 | ||||||||||||||||
Other | 12,421 | (11,970 | ) | 451 | ||||||||||||||||||||
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Total | $ | 53,759 | $ | (35,672 | ) | $ | 18,088 | |||||||||||||||||
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Page 19
Quarterly Financial Report as of December 31, 2017 (Unaudited)
Note 8 – Due from/to Affiliates(continued)
(b) Intercompany balances among Debtors and Debtor-Controlled Entities andNon-Controlled Affiliates (continued)
| (1) | Represents claims against LBT that were admitted in eight different currencies. |
| (2) | Includes gross claims against Lehman Brothers Bankhaus A.G. (“Bankhaus”) of €9.314 billion that were assigned as a result of the Harmonizing Resolution (refer toNote 8(c) – Settlements withNon-Controlled Affiliates, in the December 31, 2016 Balance Sheets, Docket No. 55127, for further information), net of €7.823 billion of distributions received by owners of the claims prior to the assignment of the claims to LBHI. |
| (3) | “Collections to Date in Local Currency” and “Collections to Date in USD” include distributions received on the claims prior to the assignments of the claims to LBHI and Debtor-Controlled Entities. |
| (4) | “Admitted and Unsettled Filed Claims in USD” includes the unsettled historical receivable balances for filed claims which have not yet been admitted. |
| (5) | Other claims against Lehman Brothers Finance S.A., Bankhaus, LBT and LBIE, acquired through settlements with third parties are included in Affiliate Claims receivables in the Balance Sheets (refer toNote 6 – Receivables from Debtors and Debtors-Controlled Entities and Other Assets for additional information). |
Page 20
Quarterly Financial Report as of December 31, 2017 (Unaudited)
Note 8 – Due from/to Affiliates(continued)
(c) Settlements withNon-Controlled Affiliates
Joint Venture to Facilitate Resolution of LBIE Claims
On January 31, 2014, Lehman Brothers Holdings Intermediate 2 Ltd. (“LBHI2”), aNon-Controlled Affiliate, LBHI, and Elliott Management Corporation and King Street Capital Management, L.P. (together, the “Funds”) entered into definitive documentation and consummated a joint venture to facilitate the resolution of LBIE claims (the “Joint Venture”):
| • | LBHI2 contributed to the Joint Venture its senior claim of GBP 38 million (“Senior Claim”), subordinated claims of GBP 1.25 billion (“Sub Debt”), and a portion of the economic interest in its preferred equity (“Preferred Equity”) in LBIE. |
| • | The Funds paid approximately GBP 650 million to LBHI2 and contributed to the Joint Venture the distributions on their claims against LBIE (approximately GBP 2.6 billion as of January 31, 2014) in excess of the principal amount plus post-administration interest at 8% per year. LBHI2’s final recoveries and distributions will be determined following the resolution of various outstanding legal issues currently in litigation. |
The Joint Venture includes a joint recovery pool governed by a specific sharing formula. Subject to certain adjustments, which could be material, all recoveries from the Sub Debt, Senior Claim, Preferred Equity, and the Funds’ contribution are split as follows:
| (a) | 100% to the Funds up to the Tier 1 Pool Threshold Amount; |
| (b) | For recoveries between the Tier 1 Pool Threshold Amount up to the Tier 2 Pool Threshold Amount, 70% to the Funds and 30% to LBHI2; |
| (c) | For recoveries between the Tier 2 Pool Threshold Amount up to the Tier 3 Pool Threshold Amount, 50% to the Funds and 50% to LBHI2; and |
| (d) | For recoveries above the Tier 3 Pool Threshold Amount, 25% to the Funds and 75% to LBHI2. |
The “Tier 1 Pool Threshold Amount” is GBP 650 million. The “Tier 2 Pool Threshold Amount” is GBP 1.3 billion plus interest calculated at the simple rate of 2.25% from November 30, 2013. The “Tier 3 Pool Threshold Amount” is GBP 2.2 billion plus interest calculated at the simple rate of 4.25% from November 30, 2013.
A detailed summary of the terms of the parties’ commitments and the Joint Venture is available atwww.lehman-docket.com in the Key Documents section.
If LBIE makes distributions on the Preferred Equity before aggregate distributions from the Joint Venture to the Funds and LBHI2 have reached GBP 2.2 billion (plus interest), then, in certain circumstances, LBHI2, Luxembourg Finance S.a.r.l. (“Lux Finance”) and LBHI shall be obligated to make payments to preserve the economic terms of the transaction as if 100% of the Preferred Equity proceeds had been transferred by LBHI2 to the Joint Venture.
Receivables from LBHI2:
| • | Lux Finance receivable from LBHI2 of $749 million (including $19 million of accrued interest) was formally admitted by the Administrators of LBHI2 in August 2017 as an unsecured claim for £515 million. Lux Finance received a payment of £658 million on September 6, 2017, which reflected payment of the unsecured claim in full plus statutory interest of £143 million. The timing and amount of future payments of statutory interest are uncertain. As such, the Company has not recorded additional accrued interest that may be due to Lux Finance. |
| • | LB Scottish Holdings LP3 (“SLP3”) has receivables from LBHI2, which are contingent on the resolution of a number of complex legal disputes surrounding distributions from LBIE. The Company has not recorded an estimate of future recoveries on the subordinated receivables from LBHI2 of $6.139 billion (“SLP3 Sub Rec”). The Company has reserved in full for the SLP3 Sub Rec. |
| • | Currently, LBHI is the indirect parent and the beneficiary of any proceeds paid pursuant to the SLP3 Sub Rec. |
| • | In addition, the Company has receivables from certainNon-Controlled Affiliates that have claims against LBHI2. |
Page 21
Quarterly Financial Report as of December 31, 2017 (Unaudited)
Note 9 – Payables to Debtors and Debtor-Controlled Entities and Other Liabilities
Payables to Debtors and Debtor-Controlled Entities and Other Liabilities includes: (i) $1.4 billion related to certain post-petition activities between and among Debtors and Debtor-Controlled Entities, with the corresponding assets reflected in Receivables from Debtors and Debtor-Controlled Entities and Other Assets and (ii) $154 million of other liabilities.
The following table summarizes the main components of Payables to Debtors and Debtor-Controlled Entities and Other Liabilities as of December 31, 2017:
| Debtors | Debtor- | Total Debtors and Debtor- | ||||||||||||||||||||||||||
| $ in millions | LBHI | LCPI | LBSF | Other Debtors | Total | Controlled Entities | Controlled Entities | |||||||||||||||||||||
Secured Notes (1) | $ | 685 | $ | 555 | $ | 53 | $ | — | $ | 1,293 | $ | — | $ | 1,293 | ||||||||||||||
Fundings and other activites(2) | 22 | 3 | 7 | 9 | 41 | 30 | 71 | |||||||||||||||||||||
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Payables to Controlled Affiliates | 707 | 558 | 60 | 9 | 1,334 | 30 | 1,364 | |||||||||||||||||||||
Distributions on Allowed Claims (not remitted) | 4 | 0 | 0 | — | 4 | — | 4 | |||||||||||||||||||||
Payable to Lehman Brothers U.K. Holdings (Delaware) Inc. | 55 | — | — | — | 55 | — | 55 | |||||||||||||||||||||
Other | 21 | 9 | 0 | 1 | 31 | 64 | 94 | |||||||||||||||||||||
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Total Other Liabilities | 80 | 9 | 0 | 1 | 90 | 64 | 154 | |||||||||||||||||||||
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Total Payables to Controlled Affiliates and other liabilities | $ | 787 | $ | 567 | $ | 60 | $ | 9 | $ | 1,424 | $ | 93 | $ | 1,518 | ||||||||||||||
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Refer toNote 6 - Receivables from Debtors and Debtor-Controlled Entities and Other Assets for footnote 1 through 2 explanations.
Page 22
Quarterly Financial Report as of December 31, 2017 (Unaudited)
Note 10 – Taxes Payable
Taxes payable is an estimate of tax liabilities, net of the estimated impact of any refund claims, deposits and net operating losses (“NOL”). Taxes payable have been allocated among the members of the LBHI Tax Group pursuant to the Debtor Allocation Agreement (the “DAA”) (see below for further information).
As of December 31, 2017, the Company has recorded an estimate of $153 million for potentialpre- and post-petition amounts owed to federal, state, local and international taxing authorities, net of expected refund claims. Between October 5, 2017 and December 31, 2017, the Company increased its tax payable estimate by approximately $13 million as a result of an IRS refund that was received in December 2017 for deposits made by LBHI in 2007 and 2010.
Debtor Allocation Agreement
The Debtor Allocation Agreement, which became effective on the Effective Date, addresses the relationship among the Debtors and certain Affiliates with respect to consolidated federal/combined state/local income taxes forpre-petition and post-petition years. Pursuant to the DAA, any tax receivables or payables related topre-petition, consolidated group taxes, including the IRS refund, are treated as allowedpre-petition claims between LBHI and other Debtors and Debtor-Controlled Entities and subject toset-off or recoupment.
Net Operating Losses
The NOLs of the LBHI Tax Group (including Debtor-Controlled Entities) are subject to audit and adjustment by the IRS and primarily expire in or about 2028. Substantially all of the LBHI Tax Group’s current consolidated net operating loss carryovers are attributable to the Debtors. The Plan provides for an orderly liquidation of the Debtors. As previously disclosed in the Company’s Quarterly Financial Report as of March 31, 2012 [Docket No. 29731], the LBHI Tax Group received a private letter ruling from the IRS in connection with the Plan going effective that stated (i) the liquidation of the Debtors for U.S. federal income tax purposes may occur over an extended period, and (ii) the reduction of the LBHI Tax Group’s NOLs as a result of the discharge of debt pursuant to the Plan generally would not occur until completion of the liquidation. Upon completion of the liquidation of the Debtors, all remaining NOLs of the Debtors will be eliminated.
Tax Reform 2017
The financials include the impact of the Tax Cuts and Jobs Act (“TCJA”) which was signed into law on December 22, 2017. The final impact of the TCJA may differ from these estimates after further refinement of the Company’s calculations and additional guidance that may be issued by the U.S. Department of Treasury. As of the date of this filing, the Company does not expect the TCJA to have a material impact on the Company’s estimates of future tax liabilities.
Page 23
Quarterly Financial Report as of December 31, 2017 (Unaudited)
Note 11 – Liabilities Subject to Compromise
The table below presents the Company’s estimates of claim values as of December 31, 2017 by claim category, and the changes in estimates since the previously filed Quarterly Financial Report as of October 5, 2017:
| ($ billions) | Period Ending December 31, 2017 | December 31, 2017 Claims Balance | ||||||||||||||||||||||||||||||||||
Claim Category | October 5, 2017 Claims Balance | Allowed Claims | Change in Estimated Active Claims | December 31, 2017 Claims Balance | LBHI | LCPI | LBSF | Other Debtors | ||||||||||||||||||||||||||||
Direct Claims: | ||||||||||||||||||||||||||||||||||||
Debt | $ | 99.2 | $ | — | $ | — | $ | 99.2 | $ | 98.5 | $ | — | $ | — | $ | 0.7 | ||||||||||||||||||||
Derivatives | 23.5 | — | (0.5 | ) | 23.0 | 0.0 | 0.0 | 20.6 | 2.4 | |||||||||||||||||||||||||||
Other | 13.0 | 0.0 | (0.0 | ) | 13.0 | 5.8 | 6.7 | 0.1 | 0.3 | |||||||||||||||||||||||||||
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Total Direct Claims | 135.8 | 0.0 | (0.5 | ) | 135.2 | 104.4 | 6.8 | 20.7 | 3.4 | |||||||||||||||||||||||||||
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Affiliate Claims Direct | 108.7 | 0.3 | (0.3 | ) | 108.7 | 58.8 | 23.1 | 21.3 | 5.5 | |||||||||||||||||||||||||||
Affiliate Guarantee Claims | 12.7 | — | — | 12.7 | 12.7 | — | — | — | ||||||||||||||||||||||||||||
Third Party Guarantee Claims | 68.3 | — | (0.5 | ) | 67.8 | 67.8 | — | — | — | |||||||||||||||||||||||||||
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Total Liabilities Subject to Compromise | 325.5 | 0.3 | (1.4 | ) | 324.5 | 243.7 | 29.9 | 42.0 | 8.9 | |||||||||||||||||||||||||||
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Taxes Payable | 0.1 | — | 0.0 | 0.2 | 0.1 | 0.0 | — | 0.0 | ||||||||||||||||||||||||||||
Secured Claims Payable to Third parties | — | — | — | — | — | — | — | — | ||||||||||||||||||||||||||||
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Total Claims | $ | 325.7 | $ | 0.3 | $ | (1.4 | ) | $ | 324.6 | $ | 243.9 | $ | 29.9 | $ | 42.0 | $ | 8.9 | |||||||||||||||||||
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Allowed Claims | 320.9 | 0.3 | — | 321.2 | 241.0 | 29.9 | 42.0 | 8.4 | ||||||||||||||||||||||||||||
Estimated Unresolved Claims to be Allowed (1) | 4.8 | — | (1.4 | ) | 3.4 | 2.8 | 0.0 | 0.0 | 0.6 | |||||||||||||||||||||||||||
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Total Claims | $ | 325.7 | $ | 0.3 | $ | (1.4 | ) | $ | 324.6 | $ | 243.9 | $ | 29.9 | $ | 42.0 | $ | 8.9 | |||||||||||||||||||
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Less : Claims Distributions and other reductions(2)(3) |
| (153.6 | ) | (101.3 | ) | (25.3 | ) | (18.9 | ) | (8.0 | ) | |||||||||||||||||||||||||
Post Petition Interest paid(3) |
| (0.3 | ) | — | — | — | (0.3 | ) | ||||||||||||||||||||||||||||
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Net Claim Liability at December 31, 2017 |
| $ | 170.8 | $ | 142.6 | $ | 4.5 | $ | 23.0 | $ | 0.6 | |||||||||||||||||||||||||
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All values that are exactly zero are shown as “-”. Values between zero and $0.5 million appear as “0”. Totals may not foot due to rounding.
| (1) | The Company has excluded from these Balance Sheets any estimates of the allowed amounts of the unresolved claims filed by Credit Suisse Group AG, as these claims are subject to litigation and represent a significant portion of remaining outstanding unresolved claims. |
| (2) | Claim Distributions and other reductions include (i) distributions on allowed claims, (ii) reductions of the liabilities related to certain satisfied claims, (iii) the assignment of claims to their respective parents, and (iv) certain netting agreements between Debtors andNon-Controlled Affiliates. |
| (3) | Claims Distributions and other reductions and Post-Petition Interest paid include: |
| ($ in billions) | Total Debtors | LBHI | LCPI | LBSF | Other Debtors | |||||||||||||||
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Claims Distributions and Post Petition Interest paid | $ | 122.2 | $ | 80.3 | $ | 20.1 | $ | 15.0 | $ | 6.8 | ||||||||||
Other Reductions | ||||||||||||||||||||
Intercompany Funding Adjustments | 7.8 | — | 4.1 | 2.9 | 0.8 | |||||||||||||||
Plan Adjustments | (0.7 | ) | (2.9 | ) | 1.1 | 0.9 | 0.3 | |||||||||||||
Assignment of Claims(a) | 10.2 | 10.1 | 0.1 | — | — | |||||||||||||||
Third Party Guarantees Satisfied(b) | 12.6 | 12.6 | — | — | — | |||||||||||||||
Freddie Mac Settlement | 1.1 | 1.1 | — | — | — | |||||||||||||||
Convenience Claims and other | 0.7 | 0.1 | 0.0 | 0.1 | 0.4 | |||||||||||||||
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Total Claims Distributions and other reductions and Post Petition Interest paid | $ | 153.9 | $ | 101.3 | $ | 25.3 | $ | 18.9 | $ | 8.3 | ||||||||||
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| (a) | Claims assigned byNon-Controlled Affiliates (primarily LB RE Financing No.1 Limited of $4.6 billion, LBSN of $3.2 billion and LB UK Financing Limited of $2.1 billion), net of distributions, to LBHI in connection with settlement agreements withNon-Controlled Affiliates. |
| (b) | Allowed Guarantee claims (primarily Bankhaus $7.4 billion, LCPI $1.9 billion, LBCS $1.5 billion, LBF $0.6 billion, LOTC $0.2 billion, and LBCC $0.2 billion), net of distributions, deemed satisfied as a result of distributions to creditors from the combination of the primary obligor and LBHI as the guarantor. |
Page 24
Quarterly Financial Report as of December 31, 2017 (Unaudited)
Note 11 – Liabilities Subject to Compromise(continued)
As of December 31, 2017, Liabilities Subject to Compromise were estimated at approximately $170.6 billion, net of distributions and other reductions.
Through December 31, 2017, the Debtors have allowed approximately $321.2 billion in claims, and have remaining approximately $24.1 billion of unresolved filed claims, which are estimated to be allowed at $3.4 billion (including $666 million of post-petition interest recorded at certain Debtors).
Unliquidated Claims
There are two significant unliquidated claims against BNC (Claim No. 31036 and 33107) which, if liquidated and allowed, would have a material impact on the recoveries to BNC claimants and would result in creditors receiving significantly less than a 100% recovery on their claims.
Distributions Pursuant to Plan
Fourteenth Plan Distribution
On December 7, 2017, the Debtors made their fourteenth Plan Distribution to creditors. The Company distributed to creditors approximately $3.0 billion, of which approximately $2.3 billion was distributed on account of claims owned or formerly owned by third party creditors. The $2.3 billion includes approximately $80 million of distributions to LBHI on account of claims against LBHI, which were previously owned by third party creditors, but held by LBHI on the D14 record date.
Distributions through December 7, 2017
Through D14, the Debtors have made distributions to creditors totaling $122.0 billion, of which $89.9 billion were payments on account of claims owned or formerly owned by third party creditors.
Post-Petition Interest
In accordance with section 8.13(c) of the Plan, to the extent that any Debtor has Available Cash, as defined in section 1.5 of the Plan, after all Allowed Claims against that Debtor have been satisfied in full, each holder of each such Allowed Claim entitled to receive post-petition interest shall receive post-petition interest on the Allowed amount of such Claim.
As of December 31, 2017, LOTC has paid $206 million for post-petition interest. As of December 31, 2017, there is no accrual for post-petition interest as LOTC did not record estimates for post-petition interest on affiliate claims and claims assigned to LBHI through the Lehman Brothers Finance S.A. (“LBF”) Settlement in March 2013 (refer to the December 31, 2013 Balance Sheets, Docket No. 43916, for additional information). Substantially all remaining cash at LOTC (after all Allowed Claims have been satisfied in full) will flow to LBHI in the form of post-petition interest and/or an equity distribution.
LBCC has recorded an estimate of $349 million for post-petition interest for both third party and affiliate claims, net of distributions to (i) LBHI of approximately $29 million on claims that were purchased by LBHI from third party creditors for post-petition interest, (ii) certain Debtors andNon-Controlled Affiliates of approximately $14 million, and (iii) $5 million for Plan Adjustments. This amount is based on thePost-D13 Cash Flow Estimates.
Page 25
Quarterly Financial Report as of December 31, 2017 (Unaudited)
Note 12 – Legal Proceedings
The Company is involved in a number of judicial, regulatory and mediation proceedings concerning matters arising in connection with the bankruptcy proceedings and various other matters. The Company is unable at this time to determine the financial impact of such proceedings and the impact that any potential recoveries or liabilities may have upon the Balance Sheets. As more information becomes available, the Company may record revisions, which may be material, in future Balance Sheets.
Affirmative litigations:
| Counterparty | Debtor(s) | Commenced | Court | Court Reference | Most Recent Disclosure | |||||
Citibank (“Citibank Litigation”) | LBHI | June 2014 | Bankruptcy Court | 12-010044 (SCC) | October 5, 2017 Balance Sheets - Docket No. 57049 | |||||
| Mortgage Sellers | LBHI | Various | Various | Various | October 5, 2017 Balance Sheets - Docket No. 57049 | |||||
Bank of America National Association et al. (“SPV Avoidance Actions”) | LBSF | September 2010 | Bankruptcy Court | 10-03547 (SCC) | June 30, 2017 Balance Sheets - Docket No. 56297 | |||||
| Credit Suisse Group AG | LBHI, LBSF LBCS, | November 2013 | Bankruptcy Court | 13-01676 (SCC) | September 30, 2013 Balance Sheets - Docket No. 42236 | |||||
Ballyrock ABS CDO2007-1 Limited Wells Fargo Bank N.A. (“Ballyrock Litigation”) | LBSF | February 2009 | Bankruptcy Court | 09-01032 (SCC) | March 31, 2012 Balance Sheets - Docket No. 29731 | |||||
Other litigations:
| ||||||||||
| Counterparty | Debtor(s) | Commenced | Court | Court Reference | Most Recent Disclosure | |||||
Lehman Brothers International (Europe) (in administration) (“LBIE Waterfall Applications”) | LBHI | Not applicable | Not applicable | Not applicable | (a) | |||||
| RMBS Trustees’ Claims | LBHI SASCO | September 2009 | Bankruptcy Court | 08-13555 (SCC) | (b) | |||||
Page 26
Quarterly Financial Report as of December 31, 2017 (Unaudited)
Note 12 – Legal Proceedings(continued)
| (a) | LBIE Waterfall Applications |
On October 24, 2017 the UK Court of Appeal issued its judgment on the Waterfall II (A) & (B) appeals. Among other things, the Court of Appeal found that (i) Bower v. Marris does not apply to the calculation of statutory interest, such that dividends should be allocated first to the payment of principal and then to the reduction of statutory interest; (ii) statutory interest doesn’t compound after a debt is paid in full; (iii) creditors aren’t entitled to interest for the late payment of statutory interest; and (iv) interest on contingent debts accrues from the administration date.
In an announcement dated December 22, 2017, LBIE proposed a full and final settlement in respect of surplus entitlements and the payment of statutory interest, which would also have the effect of settling remaining Waterfall litigation matters.
On December 19, 2017, the UK Court of Appeal ruled in favor of the Her Majesty’s Revenue and Customs and held that payments by LBIE of statutory interest are subject to withholding tax (subject to treaty or other exemptions). LBIE has not announced its decision to either appeal or not appeal this ruling to the UK Supreme Court.
Refer to the filed Balance Sheets as of June 30, 2017 for previous disclosure.
| (b) | RMBS Trustees’ Claims |
On July 6, 2017, the Bankruptcy Court approved the RMBS Trust Settlement Agreement (the “Proposed Settlement Agreement”) between the Company and a group of fourteen (14) institutional investors holding significant amounts of Lehman-issued residential mortgage-backed securities. Under the Proposed Settlement Agreement, the Company requested that the claims related to the accepting covered RMBS trusts be estimated and allowed at $2.38 billion. Hearings began on November 20, 2017 and concluded on February 9, 2018.
On March 8, 2018, the Bankruptcy Court issued its ruling in the Estimation Proceeding granting the Plan Administrator’s request to estimate the Trustees’ claims at $2.38 billion.
Refer to the filed Balance Sheets as of October 5, 2017 for previous disclosure.
Page 27
Quarterly Financial Report as of December 31, 2017 (Unaudited)
Note 13 – Currency Translation
The Company’s general ledger systems automatically translate assets and liabilities recorded innon-U.S. dollar functional currencies using exchange rates as of the date of the Balance Sheets. The gains or losses resulting from translatingnon-US dollar functional currency into U.S. dollars are reflected in Stockholders’ Equity.
Note 14 – Financial Systems and Control Environment
Procedures, controls and resources used to create the Balance Sheets were modified, including a significant reduction in resources, in comparison to what was available to the Company prior to the Chapter 11 cases. The Company is continuously reviewing its accounts, and as a result, modifications, errors and potential misstatements might be identified. Consequently, the Company may record adjustments, which may be material, in future Balance Sheets.
.
Page 28
Quarterly Financial Report as of December 31, 2017 (Unaudited)
III. Balance Sheets
LEHMAN BROTHERS HOLDINGS INC. and Other Debtors and Debtor-Controlled Entities
Balance Sheets As of December 31, 2017
(Unaudited)
| ($ in millions) | Lehman Brothers Holdings Inc. 08-13555 | Lehman Brothers Special Financing Inc. 08-13888 | Lehman Brothers Commodity Services Inc. 08-13885 | Lehman Brothers Commercial Corporation 08-13901 | Lehman Brothers OTC Derivatives Inc. 08-13893 | Lehman Brothers Financial Products Inc. 08-13902 | Lehman Brothers Derivative Products Inc. 08-13899 | Lehman Commercial Paper Inc. 08-13900 | Luxembourg Residential Properties Loan Finance S.a.r.l. 09-10108 | Other Debtors (2) | Total Debtor Entities (1) | Total Debtor- Controlled Entities (3) | Total Company | |||||||||||||||||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Cash and short-term investments | $ | 265 | $ | 116 | $ | 6 | $ | 7 | $ | 3 | $ | 1 | $ | 1 | $ | 44 | $ | — | $ | 11 | $ | 454 | $ | 123 | $ | 577 | ||||||||||||||||||||||||||
Cash and short-term investments pledged or restricted | 1,730 | 439 | 69 | 33 | 0 | 0 | 0 | 2 | — | 15 | 2,289 | 21 | 2,310 | |||||||||||||||||||||||||||||||||||||||
Financial instruments and other inventory positions: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Commercial Real Estate | (0 | ) | 0 | — | — | — | — | — | 48 | — | — | 48 | 10 | 57 | ||||||||||||||||||||||||||||||||||||||
Loans and Residential Real Estate | 3 | — | — | — | — | — | — | 16 | — | — | 19 | 0 | 19 | |||||||||||||||||||||||||||||||||||||||
Principal investments | 6 | — | — | — | — | — | — | 3 | — | — | 9 | 95 | 104 | |||||||||||||||||||||||||||||||||||||||
Derivative Receivables and Related Assets | — | 50 | — | — | — | — | — | — | — | — | 50 | 0 | 50 | |||||||||||||||||||||||||||||||||||||||
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Total Financial instruments and other inventory positions | 9 | 50 | — | — | — | — | — | 67 | — | — | 126 | 104 | 230 | |||||||||||||||||||||||||||||||||||||||
Receivables from Debtors and Debtor-Controlled Entities and other assets | 336 | 10 | (0 | ) | 326 | 488 | 242 | 168 | 0 | 0 | 4 | 1,575 | 164 | 1,739 | ||||||||||||||||||||||||||||||||||||||
Investments in Affiliates: | — | |||||||||||||||||||||||||||||||||||||||||||||||||||
Controlled Entities | (26,960 | ) | 252 | — | — | — | — | — | 51 | — | (166 | ) | (26,823 | ) | (20,464 | ) | (47,287 | ) | ||||||||||||||||||||||||||||||||||
Non-Controlled Affiliates | 421 | — | — | — | — | — | — | — | — | — | 421 | — | 421 | |||||||||||||||||||||||||||||||||||||||
Due from Affiliates: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Debtors and Debtor- Controlled Entities | 19,245 | 417 | 260 | 20 | — | 7 | — | 5,224 | — | 110 | 25,284 | 2,412 | 27,696 | |||||||||||||||||||||||||||||||||||||||
Non-Controlled Affiliates | 16,864 | 684 | 104 | 162 | — | — | — | 135 | — | — | 17,949 | 139 | 18,088 | |||||||||||||||||||||||||||||||||||||||
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Total Due from Affiliates | 36,109 | 1,101 | 363 | 182 | — | 7 | — | 5,359 | — | 110 | 43,233 | 2,551 | 45,784 | |||||||||||||||||||||||||||||||||||||||
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Total Assets | $ | 11,911 | $ | 1,969 | $ | 438 | $ | 548 | $ | 492 | $ | 251 | $ | 169 | $ | 5,523 | $ | 0 | $ | (26 | ) | $ | 21,274 | $ | (17,499 | ) | $ | 3,774 | ||||||||||||||||||||||||
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Liabilities and Stockholders’ Equity Liabilities | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Payables to Debtors and Debtor-Controlled Entities and other liabilities | $ | 787 | $ | 60 | $ | 0 | $ | 1 | $ | 0 | $ | 0 | $ | 0 | $ | 567 | $ | — | $ | 8 | $ | 1,424 | $ | 93 | $ | 1,518 | ||||||||||||||||||||||||||
Due to Affiliates: | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Debtor-Controlled Entities | $ | 0 | — | — | — | — | — | — | — | — | — | 0 | 10,231 | 10,232 | ||||||||||||||||||||||||||||||||||||||
Non-Controlled Affiliates | — | — | — | — | — | — | — | — | — | — | — | 27 | 27 | |||||||||||||||||||||||||||||||||||||||
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Total Due to Affiliates | 0 | — | — | — | — | — | — | — | — | — | 0 | 10,259 | 10,259 | |||||||||||||||||||||||||||||||||||||||
Taxes Payable | 143 | — | 3 | 0 | — | — | 0 | 5 | — | — | 151 | 2 | 153 | |||||||||||||||||||||||||||||||||||||||
Liabilities Subject to Compromise | 142,456 | 23,010 | 182 | 350 | 2 | 0 | — | 4,528 | — | 80 | 170,607 | 0 | 170,607 | |||||||||||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||||||
Total Liabilities | 143,386 | 23,070 | 186 | 351 | 2 | 0 | 0 | 5,100 | — | 88 | 172,182 | 10,354 | 182,537 | |||||||||||||||||||||||||||||||||||||||
Stockholders’ Equity | (131,475 | ) | (21,101 | ) | 252 | 197 | 490 | 251 | 169 | 423 | 0 | (114 | ) | (150,909 | ) | (27,854 | ) | (178,762 | ) | |||||||||||||||||||||||||||||||||
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Total Liabilities and Stockholders’ Equity | $ | 11,911 | $ | 1,969 | $ | 438 | $ | 548 | $ | 492 | $ | 251 | $ | 169 | $ | 5,523 | $ | 0 | $ | (26 | ) | $ | 21,274 | $ | (17,499 | ) | $ | 3,774 | ||||||||||||||||||||||||
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See accompanying Notes to Balance Sheets
Note: All values that are exactly zero are shown as “—”. Values between zero and $500,000 appear as “0”.
| (1) | Balances for Debtors do not reflect the impact of eliminations of intercompany balances and investments in subsidiaries. |
| (2) | Certain Other Debtor’s Balance Sheets are presented on page 30. |
| (3) | Certain Debtor-Controlled Entities’ Balance Sheets are presented on page 31. |
Page 29
Quarterly Financial Report as of December 31, 2017 (Unaudited)
LEHMAN BROTHERS HOLDINGS INC. and Other Debtors and Debtor-Controlled Entities
Balance Sheets As of December 31, 2017 (Certain Other Debtors)
(Unaudited)
| ($ in millions) | Structured Asset Securities Corporation 09-10558 | East Dover Ltd 08-13908 | Lehman Scottish Finance LP 08-13904 | LB Rose Ranch LLC 09-10560 | BNC Mortgage LLC 09-10137 | Other Debtors (1) | ||||||||||||||||||
Assets | ||||||||||||||||||||||||
Cash and short-term investments | $ | 1 | $ | — | $ | — | $ | — | $ | 10 | $ | 11 | ||||||||||||
Cash and short-term investments pledged or restricted | 13 | — | — | — | 2 | 15 | ||||||||||||||||||
Financial instruments and other inventory positions: | ||||||||||||||||||||||||
Commercial Real Estate | — | — | — | — | — | — | ||||||||||||||||||
Loans and Residential Real Estate | — | — | — | — | — | — | ||||||||||||||||||
Principal investments | — | — | — | — | — | — | ||||||||||||||||||
Derivative Receivables and Related Assets | — | — | — | — | — | — | ||||||||||||||||||
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Total Financial instruments and other inventory positions | — | — | — | — | — | — | ||||||||||||||||||
Receivables from Debtors and Debtor-Controlled Entities and other assets | — | 0 | 2 | 2 | — | 4 | ||||||||||||||||||
Investments in Affiliates | — | — | (166 | ) | — | — | (166 | ) | ||||||||||||||||
Due from Affiliates: | ||||||||||||||||||||||||
Debtors and Debtor- Controlled Entities | 110 | — | — | — | — | 110 | ||||||||||||||||||
Non-Controlled Affiliates | — | — | — | — | — | 0 | ||||||||||||||||||
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Total Due from Affiliates | 110 | — | — | — | — | 110 | ||||||||||||||||||
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Total Assets | $ | 124 | $ | 0 | $ | (165 | ) | $ | 2 | $ | 12 | $ | (26 | ) | ||||||||||
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Liabilities and Stockholders’ Equity Liabilities | ||||||||||||||||||||||||
Payables to Debtors and Debtor-Controlled Entities and other liabilities | $ | 4 | $ | 0 | $ | 2 | $ | — | $ | 2 | $ | 8 | ||||||||||||
Due to Affiliates: | ||||||||||||||||||||||||
Debtor-Controlled Entities | — | — | — | — | — | — | ||||||||||||||||||
Non-Controlled Affiliates | — | — | — | — | — | — | ||||||||||||||||||
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Total Due to Affiliates | — | — | — | — | — | — | ||||||||||||||||||
Taxes Payable | — | — | — | — | — | — | ||||||||||||||||||
Liabilities Subject to Compromise | 76 | — | — | — | 4 | 80 | ||||||||||||||||||
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Total Liabilities | 80 | 0 | 2 | — | 6 | 88 | ||||||||||||||||||
Stockholders’ Equity | 44 | 0 | (167 | ) | 2 | 6 | (114 | ) | ||||||||||||||||
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Total Liabilities and Stockholders’ Equity | $ | 124 | $ | 0 | $ | (165 | ) | $ | 2 | $ | 12 | $ | (26 | ) | ||||||||||
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See accompanying Notes to Balance Sheets | ||||||||||||||||||||||||
Note: All values that are exactly zero are shown as “—”. Values between zero and $500,000 appear as “0”.
(1) Balances for Debtors do not reflect the impact of eliminations of intercompany balances and investments in subsidiaries.
Page 30
Quarterly Financial Report as of December 31, 2017 (Unaudited)
LEHMAN BROTHERS HOLDINGS INC. and Other Debtors and Debtor-Controlled Entities
Balance Sheets As of December 31, 2017 (Debtor-Controlled Entities)
(Unaudited)
| ($ in millions) | Lehman ALI Inc. (2) | Property Asset Management Inc. (3) | LB I Group Inc. (3) | Lehman Brothers Bancorp Inc. (3) | PAMI Holdings LLC | 314 Common- wealth Ave Inc. (3) | PAMI ALI LLC | Lux Finance Sarl | Other Debtor- Controlled Entities | Debtor - Controlled Group Elims (1) | Total Debtor- Controlled Entities | |||||||||||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||||||||||||||
Cash and short-term investments | $ | 0 | $ | 2 | $ | 10 | $ | 52 | $ | 1 | $ | 0 | $ | 10 | $ | 1 | $ | 48 | $ | — | $ | 123 | ||||||||||||||||||||||
Cash and short-term investments pledged or restricted | (0 | ) | 2 | 6 | 2 | — | — | 0 | — | 12 | — | 21 | ||||||||||||||||||||||||||||||||
Financial instruments and other inventory positions: | ||||||||||||||||||||||||||||||||||||||||||||
Commercial Real Estate | — | 3 | — | — | (0 | ) | (0 | ) | 5 | — | 2 | — | 10 | |||||||||||||||||||||||||||||||
Loans and Residential Real Estate | — | 0 | 0 | — | — | — | — | — | — | — | 0 | |||||||||||||||||||||||||||||||||
Principal investments | 0 | — | 25 | — | — | — | 0 | — | 69 | — | 95 | |||||||||||||||||||||||||||||||||
Derivative Receivables and Related Assets | — | — | — | — | — | — | — | — | 0 | — | 0 | |||||||||||||||||||||||||||||||||
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Total Financial instruments and other inventory positions | 0 | 3 | 25 | — | (0 | ) | (0 | ) | 5 | — | 71 | — | 104 | |||||||||||||||||||||||||||||||
Receivables from Debtors and Debtor-Controlled Entities and other assets | 1 | 0 | 5 | 69 | 0 | 0 | 1 | — | 125 | (37 | ) | 164 | ||||||||||||||||||||||||||||||||
Investments in Affiliates | (26,198 | ) | 2 | — | 6 | — | 0 | (213 | ) | — | (0 | ) | 5,939 | (20,464 | ) | |||||||||||||||||||||||||||||
Due from Affiliates: | ||||||||||||||||||||||||||||||||||||||||||||
Debtors and Debtor- Controlled Entities | 2,384 | — | 325 | — | — | (0 | ) | 494 | — | 15 | (806 | ) | 2,412 | |||||||||||||||||||||||||||||||
Non-Controlled Affiliates | 0 | — | 0 | — | — | 7 | 26 | — | 107 | — | 139 | |||||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||
Total Due from Affiliates | 2,384 | — | 325 | — | — | 7 | 519 | — | 122 | (806 | ) | 2,551 | ||||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||
Total Assets | $ | (23,812 | ) | $ | 10 | $ | 370 | $ | 128 | $ | 1 | $ | 7 | $ | 322 | $ | 1 | $ | 378 | $ | 5,096 | $ | (17,499 | ) | ||||||||||||||||||||
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Liabilities and Stockholders’ Equity Liabilities | ||||||||||||||||||||||||||||||||||||||||||||
Payables to Debtors and Debtor-Controlled Entities and other liabilities | $ | 1 | $ | 3 | $ | 6 | $ | 43 | $ | 0 | $ | 0 | $ | 5 | $ | 0 | $ | 279 | $ | (244 | ) | $ | 93 | |||||||||||||||||||||
Due to Affiliates: | ||||||||||||||||||||||||||||||||||||||||||||
Debtor-Controlled Entities | 2,608 | — | 2,718 | 57 | — | 830 | 3,081 | 167 | 1,577 | (806 | ) | 10,231 | ||||||||||||||||||||||||||||||||
Non-Controlled Affiliates | — | — | 1 | — | — | — | 0 | — | 26 | — | 27 | |||||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||
Total Due to Affiliates | 2,608 | — | 2,719 | 57 | — | 830 | 3,081 | 167 | 1,603 | (806 | ) | 10,259 | ||||||||||||||||||||||||||||||||
Taxes Payable | — | — | 2 | — | — | — | — | — | — | — | 2 | |||||||||||||||||||||||||||||||||
Liabilities Subject to Compromise | — | — | — | — | — | — | — | — | 0 | — | 0 | |||||||||||||||||||||||||||||||||
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| |||||||||||||||||||||||
Total Liabilities | 2,609 | 3 | 2,727 | 100 | 0 | 830 | 3,086 | 167 | 1,882 | (1,050 | ) | 10,354 | ||||||||||||||||||||||||||||||||
Stockholders’ Equity | (26,420 | ) | 6 | (2,357 | ) | 28 | 1 | (823 | ) | (2,764 | ) | (166 | ) | (1,503 | ) | 6,145 | (27,854 | ) | ||||||||||||||||||||||||||
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Total Liabilities and Stockholders’ Equity | $ | (23,812 | ) | $ | 10 | $ | 370 | $ | 128 | $ | 1 | $ | 7 | $ | 322 | $ | 1 | $ | 378 | $ | 5,096 | $ | (17,499 | ) | ||||||||||||||||||||
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| |||||||||||||||||||||||
See accompanying Notes to Balance Sheets
| Note: | All values that are exactly zero are shown as “—”. Values between zero and $500,000 appear as “0”. |
| (1) | Balances reflect the impact of eliminations of (i) intercompany balances only between Debtor-Controlled Entities and (ii) investments in subsidiaries only between Debtor-Controlled Entities. |
| (2) | Lehman Ali Inc. is reflected on a consolidated basis: |
| - excluding (i) separately reported wholly-owned subsidiaries that are Debtor entities (e.g. LCPI, LBSF and East Dover Ltd) and (ii) separately reported Debtor-Controlled Entities and their direct subsidiaries (e.g. 314 Commonwealth Ave Inc., Property Asset Management Inc., and Pami ALI LLC), and |
| - including wholly owned subsidiaries of LCPI (e.g. LCPI Properties Inc.). |
| (3) | Entities are reflected on a consolidated basis, e.g. Property Asset Management Inc. includes its wholly owned subsidiary, Orbit RE LLC. |
Page 31