Lehman Unit, Saab Automobile, MF Global, U.K. Data: European Bankruptcy
Lehman Brothers Holdings Inc. (LEHMQ)’s former Swiss unit lost its bid to seize some of the $1.5 billion of securities frozen at the bank’s London operation after its failure.
The U.K. Court of Appeal rejected Switzerland-based Lehman Brothers Finance SA’s claim to the so-called Rascals assets, which were caught up in the bank’s internal-settlement system when it collapsed into administration in September 2008.
While the Swiss unit said it was the owner of securities acquired on its behalf, Judge Timothy Lloyd ruled the assets should remain with Lehman Brothers International Europe and its administrators PricewaterhouseCoopers LLP.
Lehman used internal repurchase agreements and stock loans to avoid regulatory charges on securities held by its European units, a system Lloyd described as “a mess” in his written judgment. Securities were purchased through the U.K unit and placed into the “Regulation and Administration of Safe Custody and Global Settlement” system, known as Rascals, before being sold to clients, according to the judgment.
The status of the Rascals assets has been the subject of a legal battle between Lehman Brothers International Europe and other European subsidiaries.
Lehman filed bankruptcy in September 2008, plunging global financial markets into turmoil. Its London unit, now in the hands of the administrators, has been involved in lawsuits with the parent company in the U.S. and affiliates throughout Europe over billions of dollars frozen in its accounts.
Lloyd left open the possibly that Lehman Brothers Finance SA could claim Rascals assets manually processed through stock loans after July 1, 2008. They belonged to the Swiss unit “at the moment of the group’s collapse,” unless Lehman Brothers International Europe can show it paid collateral on the securities.
Saab Automobile Breakup Looms on Chinese Cash Limit, GM’s Snub
Saab Automobile’s assets may be broken up and sold to pay debt as the unprofitable Swedish company ends more than six decades of carmaking following a bankruptcy filing.
Saab Auto submitted the application at Vaenersborg District Court after a potential Chinese partner wasn’t able to provide funding while General Motors Co. (GM), a former owner, said it would block the proposed tie-up, parent company Swedish Automobile NV said Dec. 19 in a statement.
“There’s no doubt this is the blackest day in my career,” Chief Executive Officer Victor Muller said at a press conference Dec. 19 at Saab Auto headquarters in Trollhaettan. The company’s workforce totals about 3,600 employees, including 3,400 in the southeastern Swedish town.
Muller has been seeking funding for Saab since his Zeewolde, Netherlands-based company, then named Spyker Cars NV, bought it in February 2010 from Detroit-based GM, which was about to shutter the brand. Muller was in talks earlier this month with potential Chinese financial backers, including Zhejiang Youngman Lotus Automobile.
The court said in an online statement that it accepted the petition and appointed two Gothenburg, Sweden-based attorneys, Hans Bergqvist and Anne-Marie Pouteaux, as administrators.
GM, which still has a say in Saab’s strategy because of the carmakers’ technology ties, said on Dec. 17 that recent proposals for rescuing Saab were similar to earlier plans that it had rejected as being “detrimental to GM and its shareholders.”
The U.S. carmaker “made it clear it would not approve of a transaction involving Youngman,” while difficulties with rules on transferring funds out of China prevented a financing deal, Muller said Dec. 19.
Muller said that he received “two or three” expressions of interest on Dec. 19 from potential buyers, and that he’ll refer them to the bankruptcy administrator that the court appoints.
“Although this may seem like the end, it is not necessarily so,” he said.
Saab Auto traces its roots back to the establishment of aircraft manufacturer Svenska Aeroplan AB, which was set up in 1937 and began building cars 10 years later. The auto business was split off from the aerospace operations, now called Saab AB, in the 1990s, with GM gaining a 50 percent stake in 1990 and full control in 2000.
MF Global’s U.K. Staff Face ‘Threats of Violence,’ KPMG Says
MF Global Holdings Ltd (MF)’s U.K. employees have received threats amid claims the broker misused client funds before it collapsed, the company’s administrators told a London court on Dec. 19.
KPMG LLP, administrators of MF Global’s U.K. unit, asked a judge for permission to remove the names of employees from court filings for their protection.
“We have had two sets of threats, one in relation to a trader,” KPMG’s lawyer Adam al-Attar told the court. The intimidation included “threats of violence,” he said.
The threats may have been because of the association with MF Global UK Ltd.’s New York-based parent company, where there is “speculation as to the misapplication of client monies,” Al-Attar said. High Court Judge David Richards approved the application and made an order for the redactions this morning.
In the U.S. bankruptcy, trustee James W. Giddens has estimated that $1.2 billion is missing from MF Global’s segregated customer funds, which are supposed to be protected. Jon S. Corzine, the former chairman and chief executive officer, apologized to clients and investors for their losses at a hearing before U.S lawmakers last week.
No shortfall has been identified in the U.K. Administrators know where the British unit’s segregated client funds are held and have collected 82 percent of the money, KPMG partner Richard Heis said on Dec. 16.
The ruling sought by KPMG isn’t unprecedented, Heis said in a statement Dec. 19.
“This is an order that we have sought and obtained in the past when there is a possibility that disclosure of employees’ personal details, as otherwise required by legislation, might expose them to harm,” he said.
About 350 of MF Global’s 700 U.K. employees have been retained by KPMG to work on winding up the company, Al-Attar said.
MF Global was the fifth-largest financial company to file for bankruptcy when it sought U.S. court protection on Oct. 31 after placing losing bets on European sovereign debt.
Denmark Says Fjordbank Mors Creditors to Get More Money Back
Denmark’s government said creditors at Fjordbank Mors A/S (FJORD) will get more money back after the value of the failed bank’s loans was calculated to be higher than previously expected.
Eligible creditors will get a dividend of 86 percent instead of 73.6 percent, equivalent to 1.3 billion kroner more ($228 million), the Copenhagen-based Financial Stability Company, the government’s bank wind-down unit, said Dec. 21 by e-mail.
Sino-Forest Defaults on Two Bond Issues, Seeks Waivers
Sino-Forest Corp. (TRE), the Chinese timber company fending off fraud allegations, defaulted on two sets of bond payments and said it may consider seeking creditor protection.
The company received notices of default on Dec. 16 on senior notes due 2014 and 2017 after failing to publish its third-quarter financial results in a “timely manner,” Sino- Forest said Dec. 18 in a statement. The company, which said last week it expected to receive the default notices, said it’s now seeking waivers from bondholders.
The notices give Hong Kong- and Mississauga, Ontario-based Sino-Forest 30 days to rectify the situation, which the company said it doesn’t expect to be able to do.
Northern Irish Court to Rule on Quinn Bankruptcy in 2012
The legality of Sean Quinn’s bankruptcy declaration in Northern Ireland will be decided early next year, a judge in Belfast said Dec. 20 after hearing submissions from lawyers representing the former Anglo Irish Bank Corp.
Lawyers for Quinn said Dec. 20 his center of business interests have always been in Northern Ireland as his company’s headquarters were in Fermanagh, in the U.K. region, and so a decision by a Northern Ireland court to last month declare him bankrupt should stand.
Lawyers for Irish Bank Resolution Corp., formerly known as Anglo Irish., argued that Quinn’s main centre of business interests are in the Republic of Ireland and a court in Northern Ireland didn’t have the international jurisdiction to declare him bankrupt.
U.K. Stores Face Most Insolvencies Since 2008 Amid Slump
U.K. retail insolvencies may reach the highest level in four years as weak Christmas sales leave chains struggling to meet rent payments due this month, according to restructuring firm AlixPartners LLP.
“We are likely to see a number of retail collapses early in the new year and it could include some much-loved names,” Sanjay Bailur, managing director of the advisory firm’s U.K. unit, said in an interview. The outlook is “worse than the last three or four years.”
A disappointing Christmas season may be the nail in the coffin for retailers who have been barely hanging on for years. Many in sectors like value clothing, books, music, and toys “have lost their focus and have ended up with too many unprofitable stores, resulting in failed expansion plans, both domestically and overseas,” Bailur said.
Thorntons Plc (THT), a U.K. confectionery maker, fell the most in at least 22 years Dec. 21 after saying annual profit will miss estimates. Earlier this week, HMV Plc, the U.K.’s biggest CD and DVD retailer with more than 250 stores and 163.7 million pounds ($256.6 million) of debt, said that insufficient sales may cast “significant doubt” on its future. Outdoor clothing chain Blacks Leisure Group Plc (BSLA) put itself up for sale this month after shares plunged 95 percent in 2011.
U.K. consumer confidence fell to the lowest level since the depths of the financial crisis in 2009 driven by concern about a financial recovery and the euro region debt crisis, according to GfK NOP Ltd. U.K. retail sales slumped 1.6 percent in November, the most in six months, according to the British Retail Consortium, as shoppers held out for discounts and cut back on festive spending amid warnings of a looming recession.
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