Lehman liquidators in Asia defy legal action

Lehman liquidators in Asia defy legal action
By Sundeep Tucker in Hong Kong

Published: April 25 2010 19:57 | Last updated: April 25 2010 19:57

The liquidators of Lehman Brothers’ main Asian assets have continued to sell assets in Thailand in spite of legal challenges to thwart divestments.

The failed US bank left a property exposure in Thailand of close to $1bn when it failed in 2008 and three senior executives at KPMG, the court-appointed liquidator, face legal action in Bangkok from groups angered by its sales.

Eddie Middleton of KPMG told the Financial Times that the liquidator’s plans had not been deflected by the action, filed by a former joint venture partner of Lehman.

“We have continued to press ahead with our asset realisations strategy in Thailand in spite of challenges in some quarters,” he said in an interview.

The comments are the first public response to the action taken last November by Destination Properties, based in Bangkok, which has claimed to Thai police that the liquidators failed to follow due procedure when selling some assets.

Some creditors insist that the sale of Lehman property assets in Thailand should be subject to Thai, and not Hong Kong, bankruptcy proceedings.

The local police investigation is ongoing and no charges have been brought, although analysts have warned that the legal tussle could scare off potential buyers of the assets.

Mr Middleton accepted that the current violent political turmoil on the streets of Bangkok was having an impact on the timing of the asset sales because potential buyers were “nervous” about travelling either within the city or abroad.

He said that KPMG had to date generated $1.5bn through realisations of Lehman assets, spanning property, convertible bonds and derivative positions.

KPMG is liquidating eight main Lehman entities registered in Hong Kong, which were responsible for the bulk of the bank’s non-Japanese operations in the region.

The book value of the combined assets is $25bn, with the vast majority relating to inter-company transfers to Lehman units across the world, while creditor claims total $34bn.

“We have achieved a lot over the past 18 months as liquidators but we recognise there is a long way to go,” he said.

Mr Middleton was speaking on Friday after a gathering in Hong Kong of representatives of the special “protocol committee” established among global liquidators to minimise litigation relating to inter-company transfers.

The meeting was attended by Daniel Ehrmann, of Alvarez & Marsal, the restructuring group that is unwinding Lehman’s US estate, which last month published a flagship draft re-organisation plan.

Mr Ehrmann said: “We are feverishly trying to secure agreement for our plan to avoid falling into costly litigation that will eat in to creditor recoveries.”

Mr Middleton described the talks as “productive” but said that each liquidator would have to carefully consider its respective position “as there are areas we might have to disagree on”.