Business Finance & Restructuring Representations
Representation of Lehman Brothers Holdings Inc., the fourth largest investment bank in the world, and its affiliated debtors in the largest chapter 11 cases in history. Described by presiding Bankruptcy Judge Peck as “the biggest, the most incredibly complex, the most impossibly challenging international bankruptcy that ever was,” the chapter 11 filing by Lehman Brothers during the 2008 financial crisis transformed an integrated global enterprise overnight to adverse factions of third parties and affiliates all over the world competing with each other over the billions of dollars at stake, with $630 billion of assets on its balance sheet. Weil applied its experience and specialized multidisciplinary teams of attorneys in the United States and abroad to guide the chapter 11 estates through a value-maximizing administration and wind-down involving the analysis of more than 67,000 claims asserting $1.3 trillion in liabilities; the unwinding of more than 10,000 derivatives contracts and 1.7 million derivatives transactions; the sale, restructuring, and management of billions of dollars of real estate, private equity, and principal investments across the globe; and the coordination and resolution of disputes among the chapter 11 estates and administrators for approximately 100 affiliates that became the subject of their own insolvency proceedings in sixteen jurisdictions. Weil’s ability to achieve consensus in the most challenging of circumstances resulted in the formulation and confirmation of a chapter 11 plan that was supported by 95% of voting creditors asserting $400 billion in claims, including two competing groups of creditors that filed their own diametrically opposed chapter 11 plans, which saved tens of millions of dollars (or more) of professional expenses and delay that a contested confirmation hearing would have entailed. Some additional highlights of Weil’s representation include the sale of Lehman’s North American trading business within five days of the commencement of the chapter 11 cases and the sale of the investment management business within ninety-eight days of the commencement; the implementation of the first multilateral cross-border insolvency protocol; the obtaining of unprecedented judgments and rulings in connection with complex disputes involving never before tested areas of bankruptcy law relating to derivatives and structured financing transactions, such as the scope of the safe harbor provisions under the Bankruptcy Code; and the collection of more than $2 billion in derivatives receivables through hundreds of mediations pursuant to Court-approved mediation procedures.
Representation of Washington Mutual, Inc. (WMI), the parent holding company of Washington Mutual Bank (WMB), in its chapter 11 case. After the seizure of WMB by the Office of Thrift Supervision and the appointment of the FDIC as receiver for WMB, which has been touted as the largest bank failure in U.S. history, and the sale by the FDIC of substantially all of WMB’s assets to JPMorgan Chase, N.A., WMI and one of its nonbanking subsidiaries were forced to file for chapter 11 relief. In the wake of the seizure and sale of WMB’s assets, a multitude of issues arose among WMI, JPMorgan Chase, and the FDIC, including ownership of assets, such as WMI’s deposits in excess of $4 billion, with each asserting claims for billions of dollars against one another in various forums that each of the parties contended had jurisdiction over the issues, including the Receivership, the Bankruptcy Court, and various federal district courts. In an effort to avoid uncertain, protracted litigation over such disputes and make funds available for distribution to creditors, Weil, with the assistance of WMI’s other advisors, worked to negotiate a consensual resolution of those disputes, culminating in the execution of a global settlement and compromise between WMI, the FDIC, and JPMorgan Chase for $6.1 billion to $6.8 billion in value, resulting in $7.5 billion of total proceeds available for distribution to WMI’s stakeholders. The global settlement agreement was the central component of WMI’s plan of reorganization, which allowed WMI to pay a substantial portion of its creditors in full. The plan also incorporated a resolution between WMI, the equity committee, and certain holders of WMI debt, which allowed WMI’s equity interest holders to receive a distribution under the plan.
Representation of MF Global UK Limited, the UK arm of commodities and listed derivatives broker MF Global, in the first ever use of the UK special administration regime for investment firms. Prior to its insolvency, the MF Global group provided access to more than seventy exchanges globally and was a leader by volume on many of the world’s largest derivative exchanges. MF Global also was an active broker-dealer in markets for commodities, fixed income securities, equities, and foreign exchange. In fiscal 2011, MF Global generated total annual revenues of approximately $2.2 billion and reported approximately $40 billion in assets. Weil’s transatlantic team assisted the joint special administrators of MF Global UK Limited in handling MF Global UK Limited’s affairs and negotiated a $600 million global settlement agreement between MF Global UK Limited and certain of its former affiliates, avoiding potentially lengthy and costly litigation, and expediting distributions to creditors of the MF Global estates worldwide.
Representation of Benjamin M. Lawsky, Superintendent of Financial Services of the State of New York, as the Court-appointed rehabilitator of Financial Guaranty Insurance Company in the first rehabilitation proceeding involving a financial guaranty insurance company in New York (and the second such proceeding in the United States). FGIC, along with its subsidiaries, issued insurance policies that guaranteed the timely payment of principal and interest on public finance structured finance and international obligations. In January 2011 Weil, on behalf of the Superintendent, commenced discussions with key creditors regarding a plan of rehabilitation for FGIC that would be implemented as part of a proceeding under Article 74 of the NY Insurance Law. Once FGIC’s rehabilitation proceeding was commenced in the Supreme Court of the State of New York, Weil assisted the Court-appointed Rehabilitator in fulfilling his mandate to remove the causes and conditions that made FGIC’s rehabilitation proceeding necessary. Weil’s experience in not only restructuring, but also insurance and structured finance, helped the Rehabilitator tackle the unique and complex challenges presented. With Weil’s assistance, the Rehabilitator executed consensual commutation agreements with almost all of the counterparties to credit default swaps insured by FGIC, resolving in excess of $3 billion of FGIC’s potential liability for early termination payments. Weil further assisted the Rehabilitator in developing and obtaining approval of a plan of rehabilitation that maximized recoveries to FGIC’s policyholders in a fair and equitable manner.
Representation of American International Group (AIG), an international insurance and financial services organization, in connection with potential courses of action related to AIG’s credit default swap positions and the development of strategies addressing challenges presented by the financial crisis, including the sale of a $9 billion preferred interest in American Life Insurance Company (ALICO), a subsidiary of AIG, to the Federal Reserve Bank of New York (FRBNY) in exchange for a $9 billion reduction in debt owed by AIG to FRBNY.
Representation of Advanta Corp., whose primary business was operated through a nondebtor direct subsidiary, Advanta Bank Corp. (ABC), one of the largest credit card issuers in the small business market, and certain affiliates, in their chapter 11 cases. After ABC was subsequently seized by state regulators and the FDIC was appointed receiver, months of intense litigation ensued between the debtors and the FDIC over the right to seek $54 million in tax refunds. With Weil’s assistance, the litigation was successfully settled, paving the way for the conclusion of the chapter 11 cases. Under the plan that was confirmed, senior creditors, most of which were noninstitutional holders of retail notes, received recoveries ranging from 64.4% to 100%.