Administrators will spend at least three more years winding up the London-based arm of Lehman Brothers, swelling the almost £1.1bn in fees that PwC has already raked in since the bank’s calamitous collapse in 2008.
PwC has secured court approval to extend the administration process for the investment bank’s European hub to 2025, given the “complexity of unwinding the group’s affairs” after one of the biggest corporate failures in history.
Lehman Brothers was the fourth-largest investment bank in the US when it collapsed in one of the largest bankruptcies on record on 15 September 2008. Its downfall exacerbated the global financial crisis, which was prompted by risky lending, and resulted in governments around the world spending billions of pounds to bail out their lenders. The resulting credit crunch led to the worst global recession since before the second world war.
The extension means the process of selling the investment bank’s local assets, settling court cases and its taxes, and ensuring its suppliers and a complex web of creditors are paid what they are owed after its disastrous failure will end up taking at least 17 years in total.
The extension will result in growing fees for PwC’s team of administrators, who have recovered £43bn in total for creditors of Lehman Brothers International Europe (LBIE), but have themselves charged £1.08bn for their work over the past 14 years.
Overall, administrators have put in more than 3.1m hours of work to date, with average billing rising from £329 an hour in September 2008 to £620 this year.
PwC said the rise was heavily affected by inflation, as well as the mix of staff working on the wind up of LBIE, given the senior specialists required to deal with “the remaining thorny issues”.
The European arm of Lehman Brothers employed about 5,500 staff when the bank went bust, resulting in the fire sale of some of the bank’s operations and sweeping job cuts that left about 500 of its own staff to assist PwC with the administration.
The last of Lehman’s UK staff were let go in 2018, resulting in the bank finally leaving its Canary Wharf office a year later. It has left less than a dozen team members, including data, tax and special advisers and lawyers, to sort out the remaining affairs of the investment bank’s regional operations.
“The Lehman Brothers administration is one of the largest, most complex and successful insolvencies in history, requiring a vast range of skills and expertise,” PwC said in a statement.
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“Over 14 years, we have successfully returned over £43bn in total to counterparties, repaying creditors in full, plus interest. The fees incurred during the course of the administration point to the scale and complexity of this long-term global insolvency.
“A myriad of new legislation and new powers of intervention have been built directly from the lessons learned as a result of the Lehman administration. In granting the three-year extension, the court has recognised the ongoing complexity of unwinding the group’s affairs.”
