Why the Lehman restructuring could take a decade

MT chats exclusively to PwC's Tony Lomas, the man in charge of winding up Lehman's UK arm...

Last Updated: 31 Aug 2010

For our 'Black September' feature in the November issue of MT, we caught up with Tony Lomas, chairman of PwC's UK Business Recovery Services, who in September was appointed as administrator to Lehman Brothers International (Europe). He tells us about his experience so far - and warns that the mess could take 10 years to clear up...

'I got the call on the Saturday night, 13 September, to come to the board meeting Sunday lunchtime. At that meeting, I was told to begin at eight on Monday morning – from a standing start. The only thing I’ve done that was in any way analogous to Lehmans was winding up Enron’s European business. And you’d have to scale it up many times to get this level of complexity. But that’s the closest analogy anybody in my profession would have.

We’ve got 200 people from PWC in here, and we’ll have a significant presence for a serious amount of time. The process of agreeing claims here is going to be far more complex than in any other significant insolvency, just because of the complexity of the relationships Lehmans had with all its counterparties. The whole project could well last 10 years.

The first few days involved massive shock and surprise. Everything freezes – until the employees get a bit more clarity about their circumstances. It was 15 September, and pay was due at the end of that week. So the employees’ concerns were: am I going to get paid? Am I going to get a bonus? For some people, who may have had the opportunity for a golden hello elsewhere, it was: should I go out and look, or should I wait around to see if I have a job here?

Lehmans’ management team found it difficult to interact with their staff – not because they feel any guilt, but because they know them as people. I try to avoid sounding like an automaton: to be as frank as I can, without being brutal, and as open and informative as I can, without breaching confidentiality. It’s a fine balance.

I don’t have to worry that I’ve never managed the insolvency of an investment bank before. The act of recovering value is not like shelling peas, but it’s no different in concept to handling MG Rover, for example. With supreme confidence in your team, you can work through the challenges in a structured, orderly way. Pragmatism – that’s what it is.

I’m not fazed by the pressure. I’m used to dealing with crises not of our own making. That’s important: no-one is blaming us for anything. There are personal sacrifices. I do end up working through the night, but I’ve been doing this for more years than I care to remember. Approach it on the basis that you work hard and play hard, and you can keep some balance in your life. I am a Spurs fan – I’ve been so distracted by this that I’ve been able to forget their disastrous results.'

This is an excerpt from the 'Black September' feature in the November issue of MT, which should hit your desks on the 6th November. You can also subscribe HERE.

In today's bulletin:
Crunch costs us $2.8trn - so far
BP records forecast-busting £10bn profits
MT's Little Ray of Sunshine: Porsche gives hedgies a hiding
Why the Lehman restructuring could take a decade
But we are cool, insist accountants

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