Lehman’s Archstone to Convert $237 Million More Debt

Lehman Brothers Holdings Inc. said apartment-complex owner Archstone, Lehman’s largest real estate asset, needs to convert $237 million more of its debt into equity to improve its financial prospects.

Terms set in May for a $5.2 billion restructuring of the real-estate company are still being negotiated with lenders Bank of America Corp. and Barclays Plc, Lehman said today in a filing in U.S. Bankruptcy Court in Manhattan.

“This filing demonstrates the progress we have made since our filing in May toward effectuating a closing of the Archstone restructuring,” Jeff Fitts, co-CEO of Lehman’s real estate group, said in a separate statement. “The restructuring is a positive event for the company, and will substantially improve Archstone’s balance sheet and liquidity position.”

Archstone, which has required two previous bailouts from its bankers since 2009 amid the real-estate slump, has ownership interests in hundreds of apartment developments from Washington and New York to Los Angeles and San Francisco.

Lehman was part of a group of investors that acquired Archstone in 2007 in a $22 billion deal. Lehman, Barclays and Bank of America provided financing for the deal and hold more than 90 percent of Archstone’s common equity, according to court papers.

Under the new terms of the restructuring, they will convert $5.4 billion of debt into new equity interests, according to court documents.

The case is In re Lehman Brothers Holdings Inc., 08-13555, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

To contact the reporter on this story: David McLaughlin in U.S. bankruptcy court in Manhattan at dmclaughlin9@bloomberg.net; Linda Sandler in New York at lsandler@bloomberg.net.

To contact the editor responsible for this story: David E. Rovella at drovella@bloomberg.net.

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