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Is it unusual for a bankruptcy estate to do deals like this?


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Lehman Brothers Holdings Inc.'s bankruptcy estate is preparing to make a cash bid for a chunk of Archstone it doesn't already own, said people familiar with the matter, in a move designed to block real-estate mogul Sam Zell from grabbing the piece of the large apartment company.


Lehman's estate, which owns 47% of Archstone, is readying a $1.33 billion cash bid for another 26.5% of the company, which owns stakes in 77,000 apartments in major cities across the U.S. and in Germany, the people said. Lehman plans to file a bankruptcy-court motion as soon as next week asking a judge for permission to use the estate's cash to do the deal, one of these people said.


The expected bid comes after Mr. Zell's Equity Residential reached an agreement last week to pay $1.33 billion for the 26.5% stake from Bank of America Corp. and Barclays PLC. The banks currently own 53% of Archstone. Lehman's estate has the right to match any offer made for pieces of Archstone it doesn't own.

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The are going to continue to maximize the value of the estate and liquidate the assets.  There was a plan at one time to start an assset management firm as a follow-on to Lehman but the plan was rejected by the debt holders.




that seems pretty crazy--I would have expected them to liquidate everything.  Is this a decision by the debt holders as a whole (e.g., did they vote to do that)?

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  • 1 month later...



Last Friday, the bankruptcy court refused to enjoin Equity Residential’s effort to purchase Archstone through this dual right of refusal, instead stating that Lehman could sue for damages. This forced Lehman to make its decision about its right to first refusal. Lehman is going to court on Wednesday for approval to exercise that right.


The expectation is that Lehman will elect to buy the stake, increasing its ownership of Archstone to 73.5 percent. But to purchase the second stake, it would have to spend at least $2.7 billion to get a blocking position, something that it may not want to do.


Equity Residential’s strategy is clear: Lehman may be buying now, but it will eventually dispose of its Archstone stake. Equity Residential wants a toehold that will allow it to acquire all of Archstone. Splitting up the interests this way is a means to push Lehman to forgo purchasing all of Archstone and pay a lower price for this interest. In fighting for this position in Archstone, Equity Residential and Mr. Zell are even tossing around the words “negative control,” a phrase uttered by Gordon Gekko in the movie “Wall Street.”


Lehman appears willing to risk holding almost 75 percent of Archstone for a few more years to reap a higher return. And given that it has billions of cash from liquidating its assets, Lehman can sit back and do so. The firm is betting that the hot market for apartments will not cool and that it is not purchasing at the top of the market. This has been a problem before for Lehman.

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