Too Big to Fail [247]
The proceedings had begun at 4:36 p.m., and Judge James Peck had insisted that he would reach a verdict before leaving for the night. The urgency of getting the sale approved was growing more and more evident as with each passing hour the markets chipped away at the value of Lehman’s assets. Not only was the bankruptcy of Lehman, which had filed for Chapter 11 with $639 billion in assets, by far the largest in the nation’s history, but an unwinding of so complex a financial institution had never before been attempted.
On this late summer evening, the courtroom was on the warm side—the windows were closed and, for lack of enough chairs, people had taken to sitting on the air vents. Lawyers from the firm representing Lehman, Weil, Gotshal, carried in ice water.
Signaling to Harvey Miller of Weil Gotshal, Judge Peck said: “You may approach, if that’s what you’re doing. I can’t really tell. Frankly, with so many people in the courtroom, whenever I see the movement this way, I get a little concerned. Mr. Miller?”
Miller, even under these circumstances dapper in a gray suit, red tie, and blue shirt, outlined the deal: Barclays would pay $1.75 billion for Lehman’s North American operations. “This is a tragedy, Your Honor,” Miller said of what had happened to Lehman Brothers. “And maybe we missed the RTC by a week,” he added, referencing the development of the new TARP program. “That’s the real tragedy, Your Honor.”
“That occurred to me as well,” Judge Peck said sympathetically.
Many of the lawyers for Lehman’s creditors, however, were less charitable. They were furious about Lehman’s deal with Barclays, suggesting it was paying far too little and complaining about ambiguities in the purchase agreement. Daniel H. Golden of Akin Gump Strauss Hauer & Feld, representing an ad hoc group of investors holding more than $9 billion of Lehman bonds, pleaded with the court for a brief delay.
“There has simply been no credible evidence adduced at this hearing that the price that Barclays is paying for these assets represents fair value,” he said. “There’s no other testimony or evidence that suggests the other assets being purchased by Barclays represent fair value or an attempt to maximize value for creditors.”
Miller, taking umbrage at the mere suggestion that the deal wasn’t fair, shot back that the transaction had to be approved by the court immediately.
“I don’t want to use the melting ice cube” analogy, he said, the emotion showing on his face. But “it’s already half melted, Your Honor…. The things that have happened since Wednesday, make it imperative that this sale be approved. In the interest of all of the stakeholders, including Mr. Golden’s clients, they will benefit by this, Your Honor, because if the alternative happens, there will be very little to distribute to creditors, if anything.”
Nearly eight hours and three recesses into the hearing, after arguments by dozens of lawyers, several interruptions because of static from the speakers, and one brief aside about Judge Wapner’s The People’s Court, Judge Peck, moved by the enormity of trying to save what was left of a more than century-old firm, agreed to sign off on the Barclays deal.
“This is not simply approving the transaction because Mr. Miller is putting pressure on me to do so,” the judge explained. “This is not approving the transaction because I know it’s the best available transaction. I have to approve this transaction because it’s the only available transaction.”
With a heavy heart, he went on to offer a eulogy: “Lehman Brothers became a victim. In effect, the only true icon to fall in the tsunami that has befallen the credit markets. And it saddens me. I feel that I have a responsibility to all the creditors, to all of the employees, to all of the customers and to all of you.”
It was 12:41 a.m. when Judge Peck ended the hearing.