Financial Times report- Lehman Brothers' European Bankruptcy

Jennifer Hughes has an excellent article on the bankruptcy of Lehman Brothers' European operations in the weekend FT. She provides a number of interesting insights into the process to unwind the 158 year old institution:

-while Lehman's failure was global, bankruptcy is a very local excercise. Each regional unit faced unique legal and financial challenges, and the PwC executives (and Linklaters legal partners) handling the process in London would have to negotiate "Europe-only" back up plans to the "global" negotiations in New York.

-PwC rushed to get the European bankruptcy notice approved before New York filed theirs. This would protect the European operations from any US claims. They got it.

-one element of banking insolvencies gets overlooked in the popular discourse: the human toll. Tens of thousands of employees lose their savings (the compensation structure at investment banks is heavily oriented towards stock options) and jobs. Unwinding these banks is particularly tricky because it relies on the tireless effort of these very employees- essentially working for nought and under tremendous individual stress. Recognizing this challenge, PwC secured a ₤100m loan early on to guarantee employee salaries. This was critical to winning the support of traders and operations in the bank's unwinding.

-the sheer scale of the immediate bankruptcy process is staggering, and highlights the systemic risk posed by Lehman. Administrators had to: secure IT operations, notify thousands of counterparties and exchanges it dealt with around the globe, assess the risk associated with every open trade, explore the sale options of each unit, and finally, unwind each trade. While Lehman US delayed bankruptcy 5 days to unwind each trade, Lehman Europe essentially had 24 hours. Days later, they were still waiting on some banks to clarify just what Lehman assets they held.

-Some of the bank's immediate trades actually brought in millions of pounds in profits, riding the market volatility. As one trader described it, "We ended up catching both sides of the market".

-Finally, Enron's European liquidation still isn't complete, seven years after its filing. Lehman's probably won't be any quicker.