Elliott Faults Lehman Brokerage’s Navigator Sale Plan

Elliott Management Corp. stepped up pressure on defunct brokerage Lehman Brothers Inc., faulting a plan to sell a major asset to billionaire Wilbur Ross for what the hedge fund called an “artificially low” price.

Elliott, a creditor of the brokerage, said the 34 percent stake in gas-tanker company Navigator Holdings Ltd. (NVIGF) is worth more than $100 million and is being offered to W.L. Ross & Co. without a proper bidding process because of a so-called poison pill.

Trustee James Giddens should have challenged the poison pill, designed to protect Navigator from a hostile takeover, Elliott said in a filing in U.S. Bankruptcy Court in Manhattan.

“The trustee could and should have demanded the details behind the board’s adoption and selective enforcement of the poison pill, lobbied other shareholders for support, challenged the board’s refusal to waive the poison pill for other potential buyers, and conditioned the sale on such an open waiver,” Elliott said in today’s filing. “The trustee, it seems, did none of these things.”

Elliott, based in New York, asked a judge to deny Giddens’s request to complete the sale. A court hearing is set for Sept. 19.

Ross’s company, which already owns Navigator shares, has agreed to pay about $110 million for the brokerage’s interest. Giddens would be letting Ross raise its stake to 61 percent without paying a premium for control, Elliott said.

‘Rigorous Analysis’ S

“The agreement is the result of rigorous analysis, sound business judgment and is the most efficient and fair way to maximize the value of LBI’s shares in Navigator for the benefit of all customers and creditors,” Jake Sargent, a spokesman for Giddens, said in an e-mail.

The Lehman brokerage, which is liquidating separately from its parent, Lehman Brothers Holdings Inc., hasn’t paid institutional creditors anything from its $25 billion hoard after four years in liquidation.

Elliott, the $20 billion firm founded by billionaire investor Paul Singer, demanded in June that Giddens sell securities and pay an initial $3.2 billion soon. After Giddens responded last week that Elliott is a “claims trader” and doesn’t share other customers’ interests, two creditor groups sided with the hedge fund.

Institutional Customers

Most of the brokerage’s retail accounts were taken over by London-based Barclays Plc (BARC) along with the Lehman’s parent’s other North American businesses. Transfer of the retail accounts to other firms involved assets of $92 billion, or almost 90 percent of all customer property in the brokerage, the Giddens spokesman said. Institutional customers still awaiting payment have allowed claims of $12.2 billion, Elliott has said.

The Lehman parent made its first payment of $22.5 billion to creditors last April, about 3 1/2 years after filing the biggest U.S. bankruptcy in history on Sept. 15, 2008. The brokerage went into liquidation four days later.

Giddens, who also is liquidating the MF Global Inc. (MFD) brokerage, reported in April that the Lehman brokerage liquidation had cost about $733.5 million, including fees of $202.3 million for himself and his firm.

The Lehman brokerage liquidation is Securities Investor Protection Corp. v. Lehman Brothers Inc., 08-01420, U.S. Bankruptcy Court, Southern District of New York (Manhattan). The parent’s 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: Linda Sandler in New York at lsandler@bloomberg.net

To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net

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