US vultures fight for £1bn from carcass of Lehman’s
VULTURE hedge fund Elliott Management is seeking to strip hundreds of millions from the carcass of Lehman Brothers in a legal battle over its debts.
It was one of several investors to snap up Lehman’s debt after the bank’s 2008 collapse, which heralded the start of the financial crisis that crashed markets around the world.
Elliott and other hedge funds are fighting for a share of £1.2bn of assets which once belonged to the European arm of the lender. But it is engaged in a row with other creditors over the pecking order in which money will be handed out.
Lehman is being wound up by PwC, which has already doled out £35bn and has up to £8bn more to spread around.
A UK High Court ruling this week said that £5bn should go to senior creditors before Elliott and other junior creditors.
But the hedge fund was given a boost when the court dismissed a separate £2bn claim made by another group of creditors. This has put Elliott in a much stronger position than it was before, as there is now less competition for the remaining cash.
The hedge fund has a long and controversial history of aggressively targeting underperforming firms – and has never been afraid of using legal action to get its way.
Founded in 1977 by billionaire Paul Singer, the fund is infamous for buying up government debt from struggling Third World countries and demanding payment in full – regardless of the impact.
It has also bludgeoned its way into a string of underperforming businesses, including 129-yearold Dundee investment firm Alliance Trust. Last year Elliott forced out chief executive Katherine Garrett-Cox and chairman Karin Forseke in a quest for better value. Forseke branded it ‘destructive’ before she left.
Current targets include miner BHP Billiton and mobile phone giant Samsung. Even Dulux paint manufacturer Akzo Nobel is facing action, after the British firm refused to accept a takeover offer.
Singer, 72, was born in New Jer- sey to a pharmacist father and is a self-made billionaire who colleagues say is always asking ‘What am I getting for the buck?’
He has jammed onstage with rock star Meat Loaf and given money to the Tea Party, a hardright group of anti-establishment Republicans.
Those who fight back against the hedge fund generally tend to come off worse.
Last month, Klaus Kleinfeld was forced to resign as head of US aviation parts firm Arconic after sending a bizarre letter to Singer, following a campaign by Elliott for change at the top.
An Elliott spokesman declined to comment.