Aug
13
2009
Lehman Brothers get payout
Author: adminPosted By Sandy Hutchens
Defunct investment bank Lehman Brothers will get 325,000 euros ($459,100) for losing its role on a big European mortgage bond after the bank collapsed.
The payout, for being replaced as security agent on the 1.1 billion euro Windermere XIV securitisation, could eat into the returns for holders of the bond’s riskiest slice, Windermere said in a statement to holders of the commercial mortgage-backed securities (CMBS) on Wednesday.
The cost to Windermere, a special purpose company set up for the securitisation, of the replacement is estimated to be 700,000 euros, of which about 325,000 euros will be paid to Lehman Brothers International (Europe), the issuer said.
The payment to Lehman will be made “as a contribution to its costs in relation to the termination of its role”, it added.
PricewaterhouseCoopers, administrators to Lehman in Europe, said it would receive the payment and add it to the pot of funds to be distributed to the bank’s creditors.
The cost of replacing the security agent, an administrative role within the securitisation structure, may end up jeopardising payments to bondholders, Windermere added.
“Payment of the security agent’s replacement costs is likely further to affect the ability of the issuer to make payments in full of interest in respect of the notes,” the issuer said.
On Aug 7 rating agency Standard & Poor’s downgraded tranches of four Windermere bonds where Lehman acted as security agent, including Windermere XIV, due to uncertainties about the cost of replacing the failed bank.