The video unfolds the narrative of Lehman Brothers' historic bankruptcy, which stands as one of the longest and most impactful corporate collapses in financial history. It narrates the 2008 downfall of Lehman Brothers, a company with $600 billion in assets, describing the chaos it unleashed, the subsequent liquidation process, and the experiences of its employees. The narrative also touches on the distress and professional resilience of the staff involved, and how some remained part of the bankruptcy proceedings for years.

This video is significant as it sheds light on the complex legal and financial maneuvers surrounding a major corporate bankruptcy. It explores the financial recovery that could be achieved despite the initial chaos, detailing how creditors and former staff managed to secure a considerable return on investments. Additionally, notable is the insight into the intricate bankruptcy process, including asset liquidation, legal wranglings, the role of administrators, and eventual financial recoveries.

Main takeaways from the video:

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Key Vocabularies and Common Phrases:

1. lucrative [ˈluːkrətɪv] - (adjective) - Producing a great deal of profit. - Synonyms: (profitable, gainful, remunerative)

This story is about the longest, biggest and probably most lucrative bankruptcy in history.

2. distressed debt [dɪˈstrɛst dɛt] - (noun) - Debt or a security of a company that is near to, or currently going through, bankruptcy. - Synonyms: (default debt, troubled debt, bad debt)

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

3. subprime ['sʌbpraɪm] - (adjective) - Referring to loans or borrowers with poor credit ratings and higher risk of default. - Synonyms: (unsecured, high-risk, non-prime)

You know, the broad story about Lehman is that basically they got stuck with a load of subprime, subprime mortgage bonds...

4. liquidated ['lɪkwɪdeɪtɪd] - (verb) - To wind up the affairs of a company by ascertaining liabilities and apportioning assets. - Synonyms: (closed, dissolved, wound up)

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

5. insolvency [ˌɪnˈsɒlvənsi] - (noun) - The state of being unable to pay the money owed by a company. - Synonyms: (bankruptcy, liquidation, ruin)

And I think at the time we went into insolvency, there was probably about 6000 odd people in Europe.

6. administrator [ədˈmɪnɪstreɪtər] - (noun) - A person who manages the affairs, finances, or liabilities of a bankrupt company. - Synonyms: (manager, supervisor, executor)

And then once I got that email, I thought, oh, my God, this is serious. In the UK, PwC come in as the administrator.

7. statutory interest [ˈstæʧəˌtɔːri ˈɪntərɪst] - (noun) - Interest fixed by law on unpaid debts. - Synonyms: (legal interest, regulatory interest, mandated interest)

So the holders of that who held all the way through received substantial recovery, plus statutory interest.

8. exposed [ɪkˈspoʊzd] - (adjective) - Being in a state of being unprotected from financial risk or loss. - Synonyms: (at risk, vulnerable, unguarded)

Number one on the list was Lehman Brothers, with massive exposure to the crumbling mortgage market.

9. wind down [waɪnd daʊn] - (verb) - To gradually reduce the operations of a business in a controlled manner. - Synonyms: (reduce, conclude, decrease)

In the UK, PwC come in as the administrator. administrator's basically a term for the accountants. In this case, they're officers of the court who are there to look after and wind down the business.

10. exchequer [ɪksˈtʃɛkər] - (noun) - The national treasury or account of a country. - Synonyms: (treasury, finances, coffers)

A billion pounds of tax was 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.

The Last of Lehman Brothers

This story is about the longest, biggest and probably most lucrative bankruptcy in history. Lehman Brothers staff arrived at work in London this morning to be told the bank had been put into administration. It's got $600 billion in assets. Nothing like that had ever gone bust before. Nothing really like that has ever gone bust since. It's not good. It sucks. Everyone remembers the boxes being carried out by bankers, but the story didn't end there. For some people, it's continued to be their life's work.

Where do you want me to kind of look, I kind of was embarrassed to say I worked at Lehman, whereas now I feel proud. This company, which is sort of the biggest corporate failure in history, 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. You could be looking at maybe 40 times back your money. Having seen the value of these things go from 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% has been, of course, life changing. It's probably one of the biggest distressed debt trades in hedge fund history. Lehman Brothers staff arrived at work in London this morning to be told the bank had been put into administration. It is disastrous, but I think people are experienced enough and professional enough to take it on the chin.

When the news came on that Monday, it was shock. There were just people standing around in huddles, in groups because we didn't know what was going to happen. You know, text messages were flying around to say that 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 and dumped at the side of the road, brought down by bad mortgage investments. Lehman, which has 25,000 employees, will be liquidated. When I started working on Lehman, one of the things I found out is that there were people working at Lemans in the UK and in the US as well, who had been working at Lehmans before it went bust, and they were still there.

To most people, Lehmans has been long dead. But to these people, Lehmans is still very much a core part of their lives. I started at Lehman April 1989. So that's nearly 33 years ago. And I think at the time we went into insolvency, there was probably about 6000 odd people in Europe. 5000 plus of those were in the London headquarters.

Lehman Brothers goes bust very quickly, which is kind of unusual. Lehman was about as close to, like, a free fall bankruptcy as experts would call it than any other bankruptcy. 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 to the crumbling mortgage market after years of buying in big.

You know, the broad story about Lehman is that basically they got stuck with a load of subprime, subprime mortgage bonds, which are mortgage bonds of a lower credit quality. That is, the borrower is less likely to pay back than other mortgage bonds and they can't shift them. And that makes people wonder about the quality of their book of loans, their assets.

And because of that, the assets that Lehman has are being sold for basically nothing, its stock price tanking. Lehman, with the governments help, tried to find a buyer, but no luck. After a summer of rescues, the political appetite for another huge Wall street bailout was gone and the 150 year old firm was finished.

Lehman's London office had to be closed immediately. I had an email from one of my contacts at Pricewaterhouse called Cooper's PwC, and they said, you know, don't freak out, but there's some guys from our insolvency team going to be coming to the office. And then once I got that email, I thought, oh, my God, this is serious.

In the UK, PwC come in as the administrator. administrator's basically a term for the accountants. In this case, they're officers of the court who are there to look after and wind down the business. In this morning's top corporate news, creditors of Lehman brothers filed more than 16,000 claims before yesterday's deadline.

Wilmington Trust, which is a trustee for various Lehman senior notes, says it may be owed as much as 73 billion. So in the US and the UK, you have 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. Who wants to own a Lehman bond?

You know, you've just watched the news where everyone's coming out with their boxes. It doesn't look like a great credit, so nobody really wants to buy it. And then you've got the other problem, that nobody has any money anyway. There's an absence of liquidity in the financial system. The oldest money market fund in the nation wrote off roughly three quarters of a billion dollars in bad debt issued by the now bankrupt Lehman Brothers.

So my name is Darrell Ratigan. I started Lehman in 2004 as a second, and I have continued to work for Lehman administration to manage the commercial property related exposures that Lehman have. Lehman Brothers now go to court, where a judge will take control of the bank until its assets are sold.

The Lehman insolvency has various different strands. In the UK, we have an administration process, and the largest company in the UK was a company called Lehman Brothers International Europe, often referred to as Libby. Everyone likes to tidy up after themselves. You know, when the Lehman thing fell off the cliff, there was a lot of mess on the floor to clean up.

So, you know, if a company is insolvent, the chances are that you're not going to get all your money back. So you'll be getting something less than 100 p in the pound. To the extent that, you know, there has been something to sell, you might get 2030, 40, 50 p in the pound. The livy creditors have actually got something of around about 140 p in the pound.

So when a company goes bust, it has to pay its creditors and it has to do it in a particular order. And that queue we call a waterfall. Basically what happens is the cash comes out of the company and then it has to go to someone first, and then it'll go to a second person, and then it'll go to a third person.

So imagine a waterfall coming down and you've got these little buckets, 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'll be another bucket called subordinated, and then there'll be another bucket called equity, and people get paid in that order.

So once the first bucket is full up, then the next bucket gets filled up, then the next bucket gets filled up. And those buckets have been filled up a lot. If you're looking at the european, UK listed, UK issued debt, you will get paid 100% of the face value. Bear in mind, these were being sold for nothing close to that value 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 waited for that bucket to fill up have had to wait a long time, but they've got their buckets overflowing.

Hi, I'm Robert Southey. I'm the founder of Southey Capital and we are a firm that are focused on trading bankruptcy claims and distressed debt. So the libby debts, they finally settled at about 144% of par. So the holders of that who held all the way through received substantial recovery, plus statutory interest.

And the whole estate probably paid out around? 17 billion sterling. The vast majority of the recovery is coming from assets which were marked at a very low value in 2008 and subsequently recovered huge amounts and had enough time been given to the company, perhaps it would have traded out of its problems and survived.

Much more money has been realized from Lehmans estate than would have been thought possible. It's pretty unusual that unsecured creditors will get paid this much money. Pretty unusual that they get paid back in full. Very unusual that they get interest. And in between that, you actually have the tax man.

So a billion pounds of tax was 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.

So now I kind of feel proud. And when people say, who'd you work for? And I say, Lehman. Lehman? Is that still going? We thought that went ages ago. And you say, well, actually, no. There were six and a half thousand people in Europe and now there's four or five of us left and they just cannot believe it.

I'm not sure I want to be the last person to turn lights off, but I'm kind of quite keen to be around to close those last remaining entities. That's it. Blank piece of paper again and I can move on.

Economics, Finance, Global, Bankruptcy, Distressed Debt, Lehman Brothers, Bloomberg Originals