Lehman Creditors Face Complex Unwind

Citigroup's unsecured creditors are scheduled to meet Tuesday to form an official committee to represent their interests. Citi's unsecured debt was trading for around 34 cents on the dollar on Monday.

In the meantime, Lehman is taking steps to sell assets. It said in a press release Monday it is trying to sell its broker-dealer unit and is continuing negotiations to sell its investment management division, which includes its prized Neuberger Berman subsidiary.

The Wall Street Journal said Neuberger was believed to be worth $5 billion. But given the current turmoil in the market, valuing any financial asset is extremely difficult. Neuberger was not part of the bankruptcy filing, which was made by Lehman Brothers Holdings.

Barclays (BCS Quote) confirmed that it is interested in acquiring some assets of Lehman Brothers, the Associated Press reports.

"Barclays confirms that it is discussing with Lehman Brothers the possible acquisition of certain Lehman Brothers assets on terms that would be attractive to Barclays shareholders," the company said in a brief announcement to the London Stock Exchange, the AP reported.

Sanford Bernstein analyst Brad Hintz estimates that 55% of Lehman's balance sheet can be quickly liquidated, particularly such assets as receivables and short-term loans known as repurchase agreements. There are about $269 billion in securities that are "another story," Hintz wrote in a report released Monday. He estimates 27% of the $269 billion is in mortgages, 17% in derivatives, and 8% in real estate.

"Liquidation of these positions will not be easy to achieve," he writes.

As Lehman winds down and creditors mobilize themselves, financial institutions around the world will be assessing their exposure to Lehman, both direct and indirect, and working to stave off potential aftershocks.

One company that jumped out in front in this respect was Merrill Lynch (MER Quote), which agreed to sell itself to Bank of America (BAC Quote), to save itself from potentially sharing Lehman's fate.

Indeed, the fortunes of financial companies are more closely tied to those of their competitors than is the case in other industries.