Lehman’s administrators paid more than the bankers

The administrators of the UK and European arm of bankrupt investment bank Lehman Brothers are making better money than the bankers.

Lehman's administrators paid more than the bankers
Lehman’s administrators paid more than the bankers

PricewaterhouseCoopers, which has around 300 employees working on the Lehman administration, is being paid £4m a week, the accounting firm revealed yesterday. By contrast, the monthly wage bill for Lehman’s remaining 1,100 bankers is £8m – £2m a week – though that does not include planned “small retention bonuses”.

PwC has been in charge for nine weeks, taking the cost of the administration so far to £45m. Tony Lomas, the PwC partner leading the process, said it was impossible to estimate the final bill but “it’s going to be an expensive process”.

Asked about timing, he drew comparisons with the administration of Enron’s UK operations, on which he also worked. “We’re still doing bits and pieces on Enron. [That’s] seven years old. This is 10 times as big and much more complicated,” Mr Lomas said. At the current rate, the final Lehman bill after seven years would be £1.4bn.

PwC must have all its fees cleared by a yet-to-be-named creditor committee, a representative group of five creditors. More than 1,000 creditors yesterday gathered at the O2 in Greenwich, to vote on the nominations and hear PwC’s early status report.

The mood was of “sombre resignation”, one said. Others were more angry. Jeremy Boujnah, chief executive officer of BRSG Advisors, said: “The reason we’re here is to get some idea of when we’ll get our money back. They didn’t tell us anything about that. It’s a mess.”

PwC still does not know the scale of losses creditors face or how much they should expect to recover through the administration process. Lehman had $588bn (£400bn) of assets and just $17bn of capital. “With asset values dropping and claims rising, we assume the $17bn will not be enough of a buffer,” Mr Lomas said. “The question is how much of a shortfall.”

Joint administrator Stephen Pearson said that all but about $90bn of the assets are expected to “net off” against liabilities, reducing “the final balance sheet to tens of billions of dollars”.

More than 100 creditors at financial risk as a result of Lehman’s collapse, have applied for special treatment under PwC’s “hardship committee”.

By Philip Aldrick
Last Updated: 8:06PM GMT 14 Nov 2008

Source: The Telegraph

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