After being unable to get any buyers, Lehman Brothers, once the fourth-largest U.S. investment bank, will file for bankruptcy.
Lehman Brothers said in a statement today that they plan to file a Chapter 11 petition in the U.S. Bankruptcy Court for the Southern District of New York. The filing will be by the holding company and won’t include any of its subsidiaries.
For Lehman Minibond holders, this means that scenario one will play out.
In other ground breaking news today, Bank of America (BOA) announced a takeover of Merrill Lynch for $50 billion and American International Group Inc. (AIG) is also in trouble as it seeks capital to stay in business.
Warren Buffett has reportedly walked away from talks to invest into AIG.
In an unprecedented move, New York Gov. David Paterson has allowed AIG to use $20 billion of assets held by its subsidiaries to provide cash needed for the troubled insurer. Paterson explained that this will allow AIG to use those assets as collateral to borrow money to fund its daily operations.
Usually, it is very difficult for an insurer to access the funds used to pay claims; this helps to protect the insurance policy holders.