By Joseph Checkler
Of DOW JONES DAILY BANKRUPTCY REVIEW
Lehman Brothers Holdings Inc. (LEHMQ) says its Archstone
apartment company co-owners Barclays PLC (BCS) and Bank of America
Corp. (BAC) "conspired" to try to sell their once-53% stake in
Archstone to competitor Sam Zell, the latest accusation in a fight
that's really about how much Lehman will be forced to pay when it
exercises its right to buy all of Archstone.
In a Monday filing with U.S. Bankruptcy Court in Manhattan,
Lehman said the two banks breached the Archstone contract in
several ways, including by not notifying Lehman of the proposed
$1.33 billion sale of half their Archstone stake to Zell's Equity
Residential, Archstone's top competitor.
"Since the summer of 2011, the Banks have been attempting to
sell their interests in Archstone, and in the process have
committed numerous material breaches of the Archstone Agreements,"
Lehman's lawyers said in the filing. Lehman wants the banks
stripped of their voting and governance rights in Archstone and
wants them forced to at least refund Lehman for any amount over
$1.33 billion it might have to pay for the second half of the
stake.
Lawyers for Barclays and Bank of America didn't immediately
respond to requests for comment.
The fight is a continuation of one that resulted in a two-day
trial in January, with a judge ultimately allowing Lehman to
exercise a right of first offer provision to buy half of the banks'
then-53% stake in Archstone for $1.33 billion, the amount Zell
tried to pay Barclays and Bank of America for the same stake.
Lehman now owns 73.5% of Archstone and wants the banks' other
26.5% for the same $1.33 billion price. Lehman is suing the banks
for breach of contract, saying they violated agreements made after
the collapse of the commercial-real-estate market led to them
gaining their Archstone stakes.
At the January bankruptcy-court trial, lawyers for Zell and the
banks argued that Lehman's legal strategy was to attempt to fend
off Equity Residential from trying to bid on the second half of the
banks' stake, which would prevent a bidding war between the two
sides. While Lehman has the right to buy the stake, Equity
Residential could essentially bid up its biggest rival. The banks
want the eventual winning bidder, most likely Lehman, to pay a
higher "market" price.
In 2007, Lehman led a $22 billion leveraged buyout with
real-estate investor Tishman Speyer for Archstone, with Bank of
America and Barclays providing financing. The later restructuring
led to the banks' gaining their stakes.
Judge James Peck of U.S. Bankruptcy Court in Manhattan signed
off on Lehman's $65 billion creditor payback plan late last year.
On Tuesday, Lehman said the plan is now effective, and that
creditors will get their first distribution April 17.
Despite the confirmation of the plan, the company still has
billions of dollars in real estate and other assets and will
continue to exist as it unloads and manages those investments.
(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