Meltdown Roundup: Ropes, Cleary on Lehman Sale; DP Nets Nazareth

[WSJ Law Blog]

On Friday, angry creditors pushed and shoved to get into Judge James M. Peck’s court. On several occasions a security guard yelled at the crowd. Harvey Miller, lead counsel for Lehman on the bankruptcy filing, needed someone to clear a path for him to get in the room and to the front of the court. — The Wall Street Journal, September 20, 2008

The Law Blog was enjoying the weekend until Saturday night, when we took a nasty spill off our bike while riding over the gauntlet that is Brooklyn’s 3rd Street bridge. Dragging back home, we thought, this is pretty traumatic, but maybe it’s not as bad the Lehman bankruptcy hearing.

Here’s your Midday Meltdown Roundup:

Judge Peck saddened by Lehman bankruptcy: Though he admitted to understanding the Barclays-Lehman deal “Not in every aspect, but in broad outlines,” Judge James Peck approved the deal.



“Lehman Brothers became a victim,” said Judge Peck, “in effect the only true icon to fall in the tsunami that has befallen the credit markets, and it saddens me. I feel I have a responsibility to all of the creditors, to all of the employees, to all of the customers, and to all of you.”

For atmospherics of the crowded hearing, click here for a report from our Deal Journal colleagues. For the modified terms of the $1.75 billion sale (which could wind up being closer to $1.5 billion), click here.

Ropes and Cleary to see action on Lehman sell-off: With private equity firms Bain Capital and Hellman & Friedman reportedly in talks to take out Lehman’s investment-management unit, the AmLaw Daily reports that, while Weil Gotshal, Lehman’s bankruptcy counsel, is handling negotiations for Lehman, Ropes & Gray is advising longtime client Bain and Cleary is advising Hellman & Friedman.

Short-sellers shoot back (or at least saber-rattle):

As short-selling bans spread out to cover the earth, the Telegraph reports that a group of “the world’s biggest hedge funds” plans to sue the U.K.’s Financial Services Authority for losses incurred as a result of the regulator’s ban on short-selling.



One lawyer told the Telegraph: “The FSA’s remit is to maintain orderly markets — the markets were working fine, only the banks were going bust. With one swoop, the regulators have wiped out perfectly legitimate businesses and have cost some funds millions. . . it’s outrageous and illegal.”

As for suits on this side of the pond, could the investment community challenge the short-selling ban on a Fifth Amendment “takings” theory? Bruce Hiler, the head of Cadwalader’s securities enforcement group, was doubtful. “The SEC has pretty broad powers,” Hiler told the LB. However, Hiler does foresee legal challenges partly designed to force regulators to act with more predictability in the future.

Davis Polk fortifies its ranks:

With Davis Polk the most visible firm on the front lines of the financial crisis — repping Freddie Mac, the Fed, the Treasury Dept and Citi — you wouldn’t think they need anymore firepower.



But they’re getting it. Former SEC Commissioner Annette Nazareth (Brown, Columbia law) is joining the financial-regulation practice at Davis Polk, where she used to be an associate. Here’s the WSJ report.

“Right now my role is helping people navigate through this crisis and keeping them abreast of the changing landscape,” said Nazareth, 52. “There will be a big role going forward, after hopefully things settle down, with the restructuring of the financial-regulatory architecture.”

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