WASHINGTON — A federal agency that ensures private pensions took action Friday to protect pensions at Lehman Brothers Holdings Inc., an investment house that filed for bankruptcy.
The Pension Benefit Guaranty Corp. filed a request at U.S. District Court in Manhattan that is aimed at protecting the benefits of more than 26,500 workers and retirees of New York-based Lehman Brothers and its subsidiaries. The move comes ahead of a Dec. 22 bankruptcy court hearing on the sale of Lehman's investment-management business, which includes the prized money management unit Neuberger Berman.
The investment management business will take the new name of Neuberger Investment Management.
Specifically, PBGC asked the court to end Lehman's retirement plan. But a PBGC spokesman said the court filing was a protective measure and it hopes Lehman will be compelled to bring the pensions up to fully funded status.
PBGC estimates that the pension plan is 95 percent funded with $898.2 million in assets to cover $940.8 million in liabilities. If the plan ends, the PBGC expects to be responsible for $17.9 million of the $42.6 million shortfall.
The agency said it asked to end Lehman's pension plan "because it stands to be abandoned following the liquidation of substantially all the firm's assets." Terminating the plan prior to the sale would ensure that Neuberger Investment Management would be liable for the pension plan's unfunded liabilities, the agency said.
A spokeswoman for Lehman did not immediately comment on the PBGC statement.
If the plan was terminated, a 65-year-old plan participant would receive benefits capped at $51,750 per year regardless of what was owed, a PBGC spokesman said. Younger participants would receive less.
Lehman filed the biggest corporate bankruptcy in U.S. history in mid-September. After the filing, a bankruptcy court approved the sale of Lehman's U.S. investment banking operations to Barclays Capital Inc. for $1.75 billion. Its operations in Asia, Europe and the Middle East were sold for $2 billion to Nomura Holdings Inc., Japan's biggest brokerage.
The investment management unit was the last major business to be sold off.
Last week, a group of Neuberger Berman employees won a contested auction to buy its firm. The size of the winning bid wasn't disclosed, but a bid from a competing group had valued the unit at $2.15 billion. The exact value of the employee-led bid is unknown because the value of the common stock has not been determined.
Under the deal, the new employee owners of Neuberger Investment Management will give 93 percent of $875 million in preferred equity to the estate of Lehman Brothers Holdings, while 7 percent would be owned by management. Management would also obtain a 51 percent stake in common shares in the new company, with Lehman's estate getting 49 percent.
AP Business Writer Vinnee Tong contributed to this report from New York.