Lehmans administration: to the power four

TO the power fourThey’re not quite the four horseman of the apocalypse, but
their arrival certainly does not signify good times for the British economy.

Tony Lomas, Dan Schwarzmann, Mike Jervis and Steven Pearson are likely to
become well-known names over the next few months and years as the administrators
of Lehman Brothers International (Europe), the investment bank which has
collapsed, leaving a derivatives web worth hundreds of billions of pounds to


The UK arm of Lehman Brothers went into administration after the cash from
its US parent stopped flowing.

Joint administrators from PricewaterhouseCoopers were appointed on Monday of
last week, and immediately set to work to figure out what it could salvage from
the remains.

The good news, so far, is that many of the staff will at least get a last pay
cheque, though slightly delayed. The greater worry was the uncertainty
surrounding the derivatives book, and how it can be unwound without causing
further turmoil and destruction of value.


The four PwC partners share some key experiences of major administrations.

Jervis, Lomas and Pearson all worked on the wind-up of Enron’s European arm.

Pearson spoke of that administration when describing the difficulty of keeping
all stakeholders informed on big projects like these.

In order to secure the sale of one Enron asset – the right to take gas from
the North Sea ­ Pearson and the rest of his team had to get consent from more
than 100 stakeholders.

‘If you don’t anticipate all the stakeholders, the danger is when you need to
get an asset restructured you could fall foul,’ he said.

Lomas and Pearson also worked on the MG Rover administration in 2005, which
also resulted in the loss of 5,000 jobs and was politically sensitive.

The experience of both will come in handy, even if, as Lomas says, the Lehman
administration is ‘larger and more complex’ than both.

In that sense, one man who will come in handy is Dan Schwarzmann. If the
others have spent their time in the limelight, it is Schwarzmann who has been
specialising in complicated financial insolvencies.

Not only did he handle the administration of split capital investment trust
group Exeter Fund Managers, he also took charge of Independent Insurance when it
collapsed in 2001.

‘You can’t predict where you’re going to go [in accountancy],’ Schwarzmann
has been quoted saying. With the Lehman administration, unpredictability is
almost a certainty.

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