Lehman Brothers Holdings Inc. won court approval of a plan disclosed in November to sell a $1.5 billion stake in Neuberger Berman to the investment management affiliate over five years.
Neuberger Berman will gradually buy Lehman’s 48% equity interest in the company, also redeeming Lehman’s more than $800 million in preferred equity at the closing of the deal, bankrupt Lehman said Wednesday in a statement. The New York-based money management firm will get the funds for “incremental” purchases from free cash flow and “additional purchases” by employees, according to the statement.
The five-year term of the sale shows how long Lehman’s creditors will wait for their allocated payoff to be complete as Lehman pursues its $65 billion liquidation plan. CEO Bryan Marsal has said Lehman’s real estate sales will continue through 2014. The Neuberger Berman deal may take until 2016.
Lehman said in November the preferred stock would bring about $845 million, while common-stock repurchases would bring as much as $450 million. An amendment added about $70 million to its potential take, according to court papers. Lehman’s total from the deal includes $160 million already received in dividends and tax distributions, it has said.
Parts of the deal will depend on Neuberger Berman’s getting enough financing, Lehman said in November.
Lehman, which filed the biggest bankruptcy in U.S. history in September 2008, won court approval three months later to sell Neuberger Berman for no cash to the firm’s managers, who said their deal had more certainty in the credit crisis than a bid from private equity firms Bain Capital and Hellman & Friedman.
Lehman took $813.8 million in new dividend-paying preferred shares, plus common stock representing a 49% stake in the business, it said in a 2008 court filing. Executives of Neuberger Berman, the best-known part of the defunct firm’s investment management division, owned the remaining stock.
Bain and Hellman had the right to walk away from the deal if stock prices dropped below a certain level before the deal closed. Lehman said Wednesday its current sale plan would bring twice as much to creditors as the 2008 offer.