Lehman Brothers, the collapsed Wall Street investment bank, is hiring bankers and paying generous bonuses in London to stop employees defecting.
Lehman’s European business is recruiting middle and back office staff to help administrators PwC wade through the millions of transactions that must be reconciled with clients and trading partners to determine what is owed or can be claimed.
A judge overseeing Lehman’s US bankruptcy in New York last week approved an extra $50m (€35m) in bonus pay-outs to some 230 derivatives traders working to unwind the dead bank’s $10bn portfolio. The pay-outs come as bankers in the US and Europe face public anger over probable multimillion-dollar bonuses at the end of this year and, in Britain and France, additional taxes on the pay-outs.Steven Pearson, a partner at PwC and one of the four joint administrators for the dead bank’s European arm, said the higher UK pay-outs reflected demand for the skills he needed and Lehman’s unique situation.
“We’ve made our strategy and reasoning clear to our creditors,” said Mr Pearson. “We need to keep up with the market and we have to bear in mind that staff here have much narrower career development options than at other banks.”
Lehman Europe is the biggest and most complex part of the dead bank outside its US headquarters operations.
Mr Pearson said there were benefits in retaining staff with extensive knowledge of Lehman. Any bonuses, he said, were linked to the administrators’ focus on maximising the money returned to creditors.
Administrators have considered paying bonuses to staff in claims against Lehman. But they have not taken the idea further because of technical problems in buying the claims.
Lehman’s European operations employ about 440 people, up from the 360 PwC expected to need nine months ago.
When the bank collapsed in September 2008, its European business had 5,300 staff. Of those, about 2,800 were transferred to Japanese bank Nomura with its purchase of Lehman’s equities unit. About 1,000 were laid off while another 1,000 found other work.
Those who remain are trying to untangle and value the millions of trades on Lehman’s books, some of which are still technically “live” and potentially worth hundreds of millions of dollars to either side of the deal.
About 170 PwC personnel are still working on the case, down almost half from the peak in the weeks after the bank collapsed.
Those Lehman staff remaining are working to untangle and value the millions of trades on Lehman’s books, some of which are still technically “live” today and potentially worth hundreds of millions of dollars to either side of the deal.
In September PwC warned it would take a further year at least to “break the back” of the administration - the complete process will take many more - after it failed to win court approval for a plan for dealing with Lehman client assets. Administrators are currently consulting on a revised process.
Last week PwC announced it had set a bar date of 19 March next year for so-called “trust” claims involving client assets.
So far, administrators have returned some $13.3bn of the $29.8bn held by Lehman Europe for clients when the bank collapsed and settled with about 1,400 of the bank’s 6,000 counterparties. They have also filed gross claims worth $208bn against other parts of the former bank.