The administrator of Lehman Brothers’ $15bn (£9.7bn) European property empire might not be able to claw back any equity for creditors, it emerged this week.
In a statement of proposals, PricewaterhouseCoopers said that the value realisable from Lehman’s European property assets would be significantly less than the book value because of the large amount of secured debt used in its purchase, with loans coming from other banks as well as Lehman.
“On a property investment geared with debt at 80% of the purchase price, a 20% fall in asset values might reduce the value of the equity to nil,” said PwC, adding that values had fallen 25% so far this year.
Lehman Brothers UK
PwC said that it had received 300 expressions of interest in the property assets, and that it was likely to start taking them to the market in the new year.
It added that a data room had been set up for investors interested in buying Lehman’s non-performing debt assets, which have a face value of $2bn. These include commercial and residential mortgage-backed securities secured against property in the UK and Europe .
PwC is also in the process of extracting $179m of seed capital committed to property funds managed by Lehman Brothers Real Estate Partners, the property private equity arm of Lehman.
