Though I think much of the public outrage over bankers' bonuses misses the mark, these accusations concerning the Lehman executives who negotiated the fire sale last year of its North American brokerage business strike me as outrageous.
A big chunk of the $8.2 billion windfall that Lehman creditors claim Barclays received allegedly came in the form of bonus payments that the British bank promised but failed to pay to Lehman executives who were hired by Barclays after negotiating the deal. Those bonuses were among the liabilities that Barclays was supposed to assume but evidently did not as a result of some last-minute, undisclosed negotiations.
Unfortunately, I have more questions about this than answers.
For one thing, how common is it in a 363 asset sale for the executives arranging it to be hired by the buyer? If it is common, then how likely are such sales to be fair to creditors, as the Chapter 11 provision allowing for such sales requires?
And what's up with those bonuses? It's one thing for Barclays to say no to them in return for hiring the negotiators. It's another to include the amounts in the purchase price nonetheless.
Seems to me Lehman's creditors have a case here. And I'm not alone.
As the research firm CreditSights put it in a note today, "If Barclays did not pay the cure costs or bonuses, it's possible that the estate may be able to recover the difference."
I have inquiries out to bankruptcy lawyers to get answers to these questions and will update this or do a separate article on it as soon as they arrive.