Lehman Brothers filed for Chapter 11 bankruptcy protection in New York in the early hours of this morning. As the group managed its funding on a global basis, the UK trading operation was unable to meet its obligations when funding dried up, causing Lehman Brothers International, Lehman Brothers Limited, Lehman Brothers Holdings Plc and Lehman Brothers UK RE Holdings Ltd to be placed into administration. However, PWC said a number of subsidiaries remain solvent and will continue to trade, including Lehman Brothers Asset Management (Europe).
Speaking at a press conference in London, Lomas explained the process will be “an enormously complex operation”. Comparing it to other large corporate defaults in recent years, he noted it will be a bigger task than the administration of US energy firm Enron in 2001.
“It is amazing a business as huge as this can fail as a result of a loss in market confidence,” he added.
PWC said the unravelling of positions will be a global effort, and the firm will employ credit derivatives specialists to help deal with the billions of dollars worth of credit default swaps Lehman was involved with. London-based law firm Linklaters will advise on the financial law issues.
Questions still remain over employment of staff and their final payments, as it was not clear whether the bank had sufficient funds to pay them for the past working month. The bank had a $75 million a month payroll that could not be met. PWC could not put a precise number on how many staff would be axed, but estimated several dozen employees had permanently left the London office this morning.
Some staff at Lehman Brothers will remain employed at the bank, such as asset managers and servicers of asset-backed securities. However, many of the sales staff would have departed already, Lomas said.
See also: Lehman Brothers files for bankruptcy protection
No respite for Lehman after loss warning
PWC met with the UK Financial Services Authority and the Bank of England this morning to discuss how best to deal with the bank’s collapse to minimise the impact on financial markets.