Judge Says Lehman Can Buy Archstone Stake That Zell Wanted
January 11 2012 - 12:41PM
Dow Jones News
A judge Wednesday said Lehman Brothers Holdings Inc. (LEHMQ)
could buy half of two banks' stakes in the Archstone apartment
company for the same $1.33 billion that rival Sam Zell tried to pay
for them, the first step toward Lehman's goal of owning all of
Archstone.
Judge James Peck of U.S. Bankruptcy Court in Manhattan approved
Lehman's using a "right of first offer" provision to buy half of
Bank of America Corp.'s (BAC) and Barclays PLC (BCS) combined 53%
stake in Archstone, which the banks agreed to sell to Zell's Equity
Residential (EQR) late last year.
That Zell deal touched off a court fight last week between the
banks and Lehman, which owns 47% of Archstone and will own nearly
three quarters of it after this deal is consummated. All along, it
was assumed Lehman would exercise the right to step in front of
Equity Residential and buy the stake, but a trial over whether Peck
should stop that deal was held last week. Peck ruled then that the
banks could move forward with the sale to Equity Residential,
prompting Lehman to follow through Wednesday by exercising the
right of first offer.
During the two-day trial last week, the banks argued Lehman's
strategy was to pay $1.33 billion for the first half of the banks'
stake but also pay the same price for the second half, instead of
having to pay a higher, market-dictated price. If Zell or other
parties were allowed to bid for the second half, the banks argued,
they could fetch a higher price.
Lehman's own real estate co-head last week gave a "conservative"
estimate of about $1.445 billion to purchase the second half of the
banks' stake.
Lehman led a $22 billion leveraged buyout with real-estate
investor Tishman Speyer for Archstone in 2007 near the height of
the real-estate bubble, with Bank of America and Barclays providing
financing. The two banks gained their ownership stakes after the
collapse of the commercial-real-estate market led to a
restructuring of the deal.
Lehman wants to sell shares in Archstone, which owns stakes in
more than 70,000 apartments, to the public. Proceeds of an initial
public offering would flow to the failed investment bank's
creditors.
Peck late last year approved Lehman's historic $65 billion
creditor-payback plan, which should be put into motion in the
coming weeks or months.
(Dow Jones Daily Bankruptcy Review covers news about distressed
companies and those under bankruptcy protection.)
-By Joseph Checkler, Dow Jones Newswires; 212-416-2152;
joseph.checkler@dowjones.com
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