Lehman Brothers Holdings hopes to generate as much as $2 billion to repay creditors by securitizing a portfolio of commercial loans.
The failed bank is seeking approval from a bankruptcy court to engage investment management firm Fraser Sullivan to manage a portfolio of approximately $5 billion of commercial loans, according to a court filing.
Fraser Sullivan would transfer approximately $3.6 billion of the loans into a series of collateralized loan obligations, generating as much as $2 billon for the Lehman estate and its creditors.
Fraser Sullivan would serve as portfolio manager for the remaining $1.6 billion of loans that Lehman has determined are not eligible to be sold into the CLOs.
Lehman expects that many of the commercial loans it holds will be repaid in full upon maturity, but some 30% are not scheduled to mature before 2016. Securitizing them allows Lehman to accelerate distributions to creditors while maximizing the value of the assets, according to the filing.
Judge James Peek of the U.S. Bankruptcy Court for the Southern District of New York will hold a hearing on the proposed transaction on Aug. 17.
The investment bank filed bankruptcy in Sept. 2008.