CHICAGO-A US Bankruptcy Court judge in Manhattan Wednesday told Lehman Bros. to sit down and try to work out a dispute with Bank of America and Barclays Bank over the banks’ sale of 26.5% of interest in Archstone, a large apartment firm, to locally based Equity Residential, reports say.
Lehman, which owns 47% of Denver-based Archstone, has filed a right-of-first-refusal offer of $1.3 billion for the banks’ interest, in order to block the sale to Equity. The company also sued the banks in its bankruptcy court to push back the contractual first refusal deadline for the sale. The banks and Lehman were supposed to meet again late Wednesday, after the deadline for this story.
The two banks own 53% of Archstone, and in early December announced intentions to sell half their interest for $1.3 billion to Equity, owned by Sam Zell. By contract, Lehman has the right of first refusal to any sale attempt by the banks, with a decision due within 50 days.
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On Dec. 14, Lehman announced in an SEC filing that it would buy the 26.5% interest instead for about the same price. However, at about the same time, Lehman also filed suit against the banks, asking the entire timetable, and a $66 million deposit fee, be put on hold through a court-ordered injunction.
According to the Lehman motion, the company asks the court to halt the timetable and any sale due to “certain material breaches of the Archstone Agreements.” The company says in its court motion that the banks “failed to include all material terms of the transfers.” Lehman said in the motion, and in its SEC filing, that it has not been provided documents and information agreed to be provided by both parties if a sale was to be made. In the motion, Lehman also asked the judge to force the banks to produce these documents.
In the motion and in the Lehman SEC filing, the company claims that it does not believe Equity’s offer values Archstone correctly.
In court answers to the Lehman motion, the banks argued “there’s no need for a preliminary injunction in this case. Plaintiffs are suffering no harm whatsoever – much less any irreparable harm – and plaintiffs themselves seek damages, a fully adequate remedy at law.”
Equity and the banks, in the court answers and in Equity’s SEC filings, maintain that Lehman has been given more information than is required by contract. “At base, plaintiffs simply don’t like the fact that defendants have chosen to sell 50% of their interests in the Archstone Entities to a competitor,” the banks said in their court-filed answer. Zell's firm has indicated that it would be interested in buying the banks' other half interest, which would also be subject to first refusal by Lehman, if the first sale is effectively blocked.
Archstone has 48,922 apartment units, including 14,000 in Germany. Equity owns or has investments in 417 properties in 15 states and Washington, DC. The company has said it would fund the purchase through cash, debt, sales and its $1.2 billion revolving credit facility.
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