CalPERS, the California Public Employees’ Retirement System is concerned by a plan set forth by Goldman Sachs (NYSE: GS). Goldman’s plan is to liquidate Lehman Brothers Holdings Inc., the last remnants of the once storied investment bank that collapsed at the height of the financial crisis in 2006 and has a much different flavor than that proposed by CalPERS.
The pension fund had its own liquidation plan — filed in December with other bondholders — which CalPERS says is more fair to creditors and bondholders hurt by the collapse and failure of Lehman Brothers in the fall of 2008. The fall of Lehman signaled the structural depth of the financial crisis.
Joseph Dear, CalPERS chief investment officer, in a statement “This plan treats members of pension funds, including retirees who hold Lehman bonds through their pension plans, unfairly. We’re disappointed that Goldman Sachs and other big banks are proposing to reward themselves at the expense of bondholders. We want a fair outcome for all stakeholders, which is why the Ad Hoc Group of Lehman Brothers Creditors filed its competing plan in December 2010.” With $236 billion in assets, CalPERS is the nation’s largest public pension fund.
What’s left of Lehman Brothers is a shell of it’s former self, now that Barclay’s has purchased key lines of business, and other assets have been sold off around the world. While a long line of creditors remain, there are few assets left to dispose off, leaving investors clammoring for some fair, equitable distribution of assets to settle debts. Given the large amount of sophisticated investors which are creditors to Lehman, the proposals for dissolution will likely to flow in and be argued about for many months to come. In a state suffering financial crisis, California’s pension system has a small margin for error and needs to extract every last cent possible in Lehman’s liquidation.
The financial crisis continues to sting investors, even if the worst is now behind us. Pension plans with exposure to firms like Lehman and investments like mortgage backed securities have taken multiple serious hits in recent years, jeopardizing their returns and ability to make future payments. A quick resolution to this matter is unlikely to appear, and more states with exposure may soon voice similar concerns. A long line of creditors remain against Lehman Brothers, and recouping at least some of their losses will prove to be very important for many of the investors.
