Hiccups in Lehman Brothers minibonds buyback
Most local banks, under pressure from the HK government, will start a buyback program for Lehman Brothers’ minibonds next month (December). On the other hand, after working so hard on the buyback program, they were just told that the buyback may not be legitimate under US Bankruptcy law because only the liquidator has the power to buy back or handle any financial instruments issued by Lehman Brothers under the law.
I guess this is more like a technical legal issue. The banks are buying back the minibonds themselves, out of their own money. They are not touching the frozen assets of Lehman at all. I guess lawyers in Hong Kong will just need to meet with the US lawyers handling the Lehman liquidation process to resolve this issue. On the other hand, since today is Thanksgiving, I guess no one on the other side of the continent will work until next week. So the whole buyback of Lehman minibonds will be delayed for a few weeks.
On the other hand, on the face of it, these minibondholders are getting preferential treatment over all other creditors of Lehman, since they probably will get back some money before all other creditors under the buyback program. Will lawyers representing other creditors scream out and block this buyback program that has been pushed so hard by the HK government? I know that if I were one of the other creditors and had enough financial resource, I wouldn’t mind paying some lawyers to try to block this buyback program.
