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Lehman Brothers Chapter 11 Examiner’s Report 2 of 9

Lehman Brothers Chapter 11 Examiner’s Report 2 of 9

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Publicado porCervino Institute
Lehman Brothers Holdings Inc. Chapter 11 Proceedings Examiner’s Report, Volume 2 - Section III.A.2: Valuation; Section III.A.3: Survival. The Examiner in this matter was Anton R. Valukas, Chairman of Jenner & Block.
Lehman Brothers Holdings Inc. Chapter 11 Proceedings Examiner’s Report, Volume 2 - Section III.A.2: Valuation; Section III.A.3: Survival. The Examiner in this matter was Anton R. Valukas, Chairman of Jenner & Block.

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Published by: Cervino Institute on Mar 13, 2010
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05/12/2014

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The base case exit capitalization rate was approximately 4.9%, which is similar to

the base case analysis in the first quarter of 2008.1775  Therefore, the observations made

by the Examiner’s financial advisor in its analysis of the first quarter are applicable to

the second quarter as well.  Similar to the Examiner’s first quarter analysis, a significant

increase in the exit capitalization assumption was warranted.  Lehman recognized an

increase was warranted, as evidenced by its decision to disclose the sensitivity analysis

that assigned the largest possible increase in exit capitalization rates, of over 100 basis

points.1776  A sensitivity analysis prepared by Product Control that was presented to

Lehman’s CFO on May 27, 2008 considered a decrease in the exit capitalization

assumption by 50 basis points, which was the same decrease Lehman used in its March

1774 Lehman, Real Estate Product Control Update (May 27, 2008), at p. 115 [LBHI_SEC07940_2258765].

1775 Id.

1776 Final Transcript of Lehman Brothers Holdings Inc. Second Quarter Earnings Call (June 16, 2008), at p.
14 [LBHI_FIN 00007].  By stressing only one assumption (exit capitalization rates), this analysis resulted
in the largest possible reduction to exit capitalization rates that would result in Lehman’s valuation.  The
inclusion of another variable to stress would reduce the ability to reduce the exit capitalization rate and
still arrive at the same value.

480

2008 valuation.1777  As discussed in the Sum of the Parts subsection above, going‐in

capitalization rates were higher than the 4.1% used in the initial purchase price

allocation, and Lehman’s own valuation implied a going‐in capitalization rate that was

approaching 4.5%.  These indications are reflected in the Examiner’s sensitivity analysis

below.

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