This story is about the longest, biggest
This story is about the longest, biggest

and probably most lucrative bankruptcy in history.
and probably most lucrative bankruptcy in history.

Lehman Brothers staff arrived at work in London
Lehman Brothers staff arrived at work in London

this morning to be told the bank had been put into administration.
this morning to be told the bank had been put into administration.

It's got $600 billion in assets.
It's got $600 billion in assets.

Nothing like that had ever gone bust before.
Nothing like that had ever gone bust before.

Nothing really like that has ever gone by since.
Nothing really like that has ever gone by since.

It's not good. It sucks.
It's not good. It sucks.

Everyone remembers the boxes being carried out by bankers,
Everyone remembers the boxes being carried out by bankers,

but the story didn't end there.
but the story didn't end there.

For some people, it's continued to be their life's work.
For some people, it's continued to be their life's work.

I kind of was embarrassed to say I worked at Lehman, whereas now
I kind of was embarrassed to say I worked at Lehman, whereas now

I feel proud.
I feel proud.

This company, which is sort of, you know, the biggest corporate failure in history.
This company, which is sort of, you know, the biggest corporate failure in history.

It turns out that there actually is quite a lot of money in there.
It turns out that there actually is quite a lot of money in there.

If you bought early, it's pretty hard not to have made money on Lehman.
If you bought early, it's pretty hard not to have made money on Lehman.

You could be looking at maybe 40 times back your money.
You could be looking at maybe 40 times back your money.

Having seen the value of these things go from
Having seen the value of these things go from

as close to zero as anyone can be bothered to make a trade happen at,
as close to zero as anyone can be bothered to make a trade happen at,

all the way up to the highest trade at 50%
all the way up to the highest trade at 50%

has been, of course, life changing.
has been, of course, life changing.

It's probably one of the biggest distressed debt trades in hedge fund history.
It's probably one of the biggest distressed debt trades in hedge fund history.

Lehman Brothers staff arrived at work in London this morning
Lehman Brothers staff arrived at work in London this morning

to be told the bank had been put into administration.
to be told the bank had been put into administration.

It is disastrous but I think people are experienced
It is disastrous but I think people are experienced

enough and professional enough to take it on the chin.
enough and professional enough to take it on the chin.

When the news came on that Monday, it was shock.
When the news came on that Monday, it was shock.

There were just people standing around in huddles in groups.
There were just people standing around in huddles in groups.

Because we didn't know what was going to happen.
Because we didn't know what was going to happen.

You know, text messages were flying around to say
You know, text messages were flying around to say

the office was going to be locked. That we wouldn't be able to get in.
the office was going to be locked. That we wouldn't be able to get in.

That our personal belongings would all be carted off into some skip
That our personal belongings would all be carted off into some skip

and dumped to the side of the road.
and dumped to the side of the road.

Brought down by bad morgage investments, Lehman,
Brought down by bad morgage investments, Lehman,

which has 25,000 employees, will be liquidated.
which has 25,000 employees, will be liquidated.

When I started working on Lehman, one of the things I found out
When I started working on Lehman, one of the things I found out

is that there were people working at Lehman's in the UK and in the US as well,
is that there were people working at Lehman's in the UK and in the US as well,

who had been working at Lehman's before it went bust and they were still there.
who had been working at Lehman's before it went bust and they were still there.

To most people,
To most people,

Lehman's has been long dead, but to these people,
Lehman's has been long dead, but to these people,

Lehman's is still very much a core part of their lives.
Lehman's is still very much a core part of their lives.

So I started at Lehman April 1989, so that's nearly 33 years ago.
So I started at Lehman April 1989, so that's nearly 33 years ago.

I think at the time we went into insolvency,
I think at the time we went into insolvency,

there was probably about 6000 people in Europe.
there was probably about 6000 people in Europe.

5000 plus of those were in the London
5000 plus of those were in the London

headquarters.
headquarters.

Lehman Brothers
Lehman Brothers

goes bust very quickly, which is kind of unusual.
goes bust very quickly, which is kind of unusual.

Lehman was about as close to like a freefall bankruptcy as experts
Lehman was about as close to like a freefall bankruptcy as experts

would call it, than any other bankruptcy.
would call it, than any other bankruptcy.

With panic spreading, Wall Street looked for who would be the next to fall.
With panic spreading, Wall Street looked for who would be the next to fall.

Number one on the list was Lehman Brothers, with massive exposure
Number one on the list was Lehman Brothers, with massive exposure

to the crumbling mortgage market after years of buying in big.
to the crumbling mortgage market after years of buying in big.

You know, the broad story about Lehman is that basically
You know, the broad story about Lehman is that basically

they got stuck with a load of subprime,
they got stuck with a load of subprime,

subprime mortgage bonds, which are mortgage bonds of a lower credit quality, i.e.
subprime mortgage bonds, which are mortgage bonds of a lower credit quality, i.e.

the borrower is less likely to pay back
the borrower is less likely to pay back

than other mortgage bonds and they can't shift them.
than other mortgage bonds and they can't shift them.

And that makes people wonder about the quality of their book of loans.
And that makes people wonder about the quality of their book of loans.

Their assets.
Their assets.

And because of that, the assets
And because of that, the assets

that Lehman has are being sold for basically nothing,
that Lehman has are being sold for basically nothing,

Its stock price tanking.
Its stock price tanking.

Lehman, with the government's help, tried to find a buyer, but no luck.
Lehman, with the government's help, tried to find a buyer, but no luck.

After a summer of rescues, the political appetite for another huge
After a summer of rescues, the political appetite for another huge

Wall Street bailout was gone and the 150 year old firm was finished.
Wall Street bailout was gone and the 150 year old firm was finished.

Lehman's London office had to be closed immediately.
Lehman's London office had to be closed immediately.

I had an email from one of my contacts,
I had an email from one of my contacts,

PricewaterhouseCoopers, PWC,
PricewaterhouseCoopers, PWC,

and they said, you know, don't freak out, but
and they said, you know, don't freak out, but

there's some guys from the insolvency team going to be coming to the office and
there's some guys from the insolvency team going to be coming to the office and

then once I got that email, I thought, 'Oh my God, this is serious'.
then once I got that email, I thought, 'Oh my God, this is serious'.

In the UK
In the UK

PWC come in as the administrator.
PWC come in as the administrator.

Administrators basically a term for the accountants in this case they are officers of the court
Administrators basically a term for the accountants in this case they are officers of the court

who are there to look after and wind down the business.
who are there to look after and wind down the business.

In this morning's top corporate news, creditors of Lehman Brothers filed
In this morning's top corporate news, creditors of Lehman Brothers filed

more than 16,000 claims before yesterday's deadline.
more than 16,000 claims before yesterday's deadline.

Wilmington Trust, which is a trustee for various Lehman senior notes,
Wilmington Trust, which is a trustee for various Lehman senior notes,

says it may be owed as much as 73 billion.
says it may be owed as much as 73 billion.

So in the US, the UK
So in the US, the UK

you have
you have

these assets and you think they're going to be worth something at some point
these assets and you think they're going to be worth something at some point

but while everyone's panicking, they're not going to be worth anything.
but while everyone's panicking, they're not going to be worth anything.

Who wants to own a Lehman bond?
Who wants to own a Lehman bond?

You know,
You know,

you've just watched the news where everyone's coming out with their boxes.
you've just watched the news where everyone's coming out with their boxes.

It doesn't look like a great credit.
It doesn't look like a great credit.

So nobody really wants to buy it.
So nobody really wants to buy it.

And then you've got the other problem that nobody has any money anyway.
And then you've got the other problem that nobody has any money anyway.

There's an absence of liquidity in the financial system.
There's an absence of liquidity in the financial system.

The oldest money market fund in the nation wrote off
The oldest money market fund in the nation wrote off

roughly three quarters of a billion dollars in bad debt
roughly three quarters of a billion dollars in bad debt

issued by the now bankrupt Lehman Brothers.
issued by the now bankrupt Lehman Brothers.

So my name is Daryl Rattigan, I starter at Lehman in 2004 as a secondee,
So my name is Daryl Rattigan, I starter at Lehman in 2004 as a secondee,

and I have continued to work for the administration
and I have continued to work for the administration

to manage the commercial property related exposures that Lehman has.
to manage the commercial property related exposures that Lehman has.

Lehman Brothers
Lehman Brothers

now go to court
now go to court

where a judge will take control of the bank until its assets are sold.
where a judge will take control of the bank until its assets are sold.

The Lehman insolvency has various different strands.
The Lehman insolvency has various different strands.

In the UK we have an administration process
In the UK we have an administration process

and the largest company in the UK was a company called Lehman Brothers International Europe
and the largest company in the UK was a company called Lehman Brothers International Europe

often referred to as LBIE
often referred to as LBIE

Everyone likes to tidy up after themselves.
Everyone likes to tidy up after themselves.

You know, when the Lehman thing fell off
You know, when the Lehman thing fell off

the cliff, there was a lot of mess on the floor to clean up.
the cliff, there was a lot of mess on the floor to clean up.

So, if a company is insolvent,
So, if a company is insolvent,

the chances are that you're not going to get all your money back.
the chances are that you're not going to get all your money back.

So you'll be getting something less than 100p in the pound.
So you'll be getting something less than 100p in the pound.

To the extent there has been something to sell
To the extent there has been something to sell

you might get 20, 30, 40, 50p in the pound.
you might get 20, 30, 40, 50p in the pound.

The LBIE creditors have actually got something around about 140p in the pound.
The LBIE creditors have actually got something around about 140p in the pound.

So when a company goes bust,
So when a company goes bust,

it has to pay its creditors and it has to do it in a particular order.
it has to pay its creditors and it has to do it in a particular order.

And that queue we call a waterfall.
And that queue we call a waterfall.

Basically what happens is the cash comes out of the company
Basically what happens is the cash comes out of the company

and then it has to go to someone first and then they'll go to a second person
and then it has to go to someone first and then they'll go to a second person

and then it'll go to a third person.
and then it'll go to a third person.

So imagine a waterfall coming down and you've got these little buckets
So imagine a waterfall coming down and you've got these little buckets

and the top bucket might be called Super Senior Secured,
and the top bucket might be called Super Senior Secured,

and then there might be a bucket in the middle called Unsecured,
and then there might be a bucket in the middle called Unsecured,

and then there'll be another bucket called Subordinated and then there'll be
and then there'll be another bucket called Subordinated and then there'll be

another bucket called Equity. And people get paid in that order.
another bucket called Equity. And people get paid in that order.

So once the first bucket is full up,
So once the first bucket is full up,

then the next bucket gets filled up, then the next bucket gets filled up
then the next bucket gets filled up, then the next bucket gets filled up

and those buckets have been filled up a lot.
and those buckets have been filled up a lot.

If you're looking at the European
If you're looking at the European

UK listed, UK issue debt,
UK listed, UK issue debt,

you will get paid 100% of the face value.
you will get paid 100% of the face value.

Bare in mind these are being sold for nothing close to that value
Bare in mind these are being sold for nothing close to that value

when the company was going bust and then you get a load of interest on top.
when the company was going bust and then you get a load of interest on top.

And in the UK. some of the people who held on
And in the UK. some of the people who held on

and waited for that bucket to fill up, have had to wait a long time
and waited for that bucket to fill up, have had to wait a long time

but they've got their buckets overflowing.
but they've got their buckets overflowing.

Hi, I'm Robert Southey.
Hi, I'm Robert Southey.

I'm the founder of Southey Capital.
I'm the founder of Southey Capital.

And we are a firm that are focused on trading bankruptcy claims and distressed debt.
And we are a firm that are focused on trading bankruptcy claims and distressed debt.

So the LBIE debts,
So the LBIE debts,

they finally settled at about 144% of par.
they finally settled at about 144% of par.

So the holders of that who held all the way through received
So the holders of that who held all the way through received

a substantial recovery plus statutory interest.
a substantial recovery plus statutory interest.

And they the whole estate
And they the whole estate

probably paid out around 17 billion sterling.
probably paid out around 17 billion sterling.

The vast majority of the recovery
The vast majority of the recovery

is coming from assets which were marked
is coming from assets which were marked

at a very low value in 2008
at a very low value in 2008

and subsequently recovered huge amounts.
and subsequently recovered huge amounts.

And had enough time been given to the company, perhaps,
And had enough time been given to the company, perhaps,

it would have traded out of its problems and survived.
it would have traded out of its problems and survived.

Much more money has been realized
Much more money has been realized

from Lehman's estate than would have been thought possible.
from Lehman's estate than would have been thought possible.

It's pretty unusual that unsecured
It's pretty unusual that unsecured

creditors would get paid this much money.
creditors would get paid this much money.

Pretty unusual that they get paid back in full.
Pretty unusual that they get paid back in full.

Very unusual that they get interest.
Very unusual that they get interest.

And in between that, you actually have the taxman.
And in between that, you actually have the taxman.

So a billion pounds of tax was
So a billion pounds of tax was

paid to HMRC, which, you know, probably isn't in the press very much
paid to HMRC, which, you know, probably isn't in the press very much

but, you know, that's a big number for the Exchequer to receive.
but, you know, that's a big number for the Exchequer to receive.

So now I kind of feel proud and when people say, 'Oh, who'd you work for?'
So now I kind of feel proud and when people say, 'Oh, who'd you work for?'

and I say, 'Lehman'. They, 'ah, Lehman is that still going?
and I say, 'Lehman'. They, 'ah, Lehman is that still going?

We thought that went ages ago'.
We thought that went ages ago'.

And you say, 'Well, actually, no, that was six
And you say, 'Well, actually, no, that was six

and a half thousand people in Europe, and now there's four or five of us left'
and a half thousand people in Europe, and now there's four or five of us left'

and they just cannot believe it.
and they just cannot believe it.

I'm not sure I want to be the last person to turn lights off,
I'm not sure I want to be the last person to turn lights off,

but I'm kind of quite keen to be
but I'm kind of quite keen to be

around to close those last remaining entities.
around to close those last remaining entities.

That's it.
That's it.

Blank piece of paper again and I can move on.
Blank piece of paper again and I can move on.