Saturday, September 13, 2008

Lehman Hires Bankruptcy Firm

The game of brinkmanship continues:
Lehman has hired law firm Weil, Gotshal & Manges LLP to prepare a potential bankruptcy filing, according to a person familiar with the situation. The New York-based Weil has a leading bankruptcy practice and advised Drexel Burnham Lambert on its 1990 bankruptcy filing.

In a Lehman bankruptcy, the firm's brokerage units would have to enter a Chapter 7 liquidation, in which a court-appointed trustee would take over, liquidate the firm's assets and get Lehman customers back their money. In general, securities that a customer holds at a brokerage firm are legally the investor's property and aren't exposed to the claims of the firm's creditors.
A bankruptcy filing on or before Monday would bring an enormous amount of selling pressure to the equity markets. As we said before, strap in cuz it's going to be a wild ride.

Update: Catch the posts over at Calculated Risk, and don't miss the golden words in the comments.

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