Over a year after the collapse of the investment bank, Lehman Brothers Holdings (LBHI) has selected Numerix to provide it with independent real-time valuations for its one million outstanding derivatives contracts. According to the valuations vendor, the deal is one of largest and most comprehensive valuations projects of its kind to date.
Steven O’Hanlon, president and chief operating officer of Numerix, says that the signing of the vendor is a critical step in unwinding LBHI’s derivatives book and the ultimate reconciliation of outstanding creditor claims. He calls the deal “the most unique and unquestionably the largest valuation deal in history” and explains that the vendor will be working with LBHI’s derivatives team on the mandate.
“Numerix brings the best capabilities and focus to providing LBHI with a single platform and the analytics necessary for the ultimate resolution of its intercompany accounts and the integration of existing legacy systems,” O’Hanlon claims.
Daniel Ehrmann, managing director of Alvarez & Marsal and co-head of LBHI’s Derivatives Asset Team, which will be working with the vendor, explains that it was selected after a full review of the available solutions on the market. “Lehman performed an extensive search to identify a partner that could provide the analytics and technology capable to value the depth and breadth of derivatives products that were transacted in the Lehman derivatives portfolios. It became clear that Numerix was best positioned not only to provide LBHI with the valuations we need to resolve derivatives claims, but also to flex the market inputs and transaction terms to ensure that those valuations are reasonable,” he elaborates.
LBHI selected Numerix to accelerate the resolution of intercompany accounts and systems and resolve derivative claims. The Numerix team of on site financial engineers sit side by side with LBHI traders and risk managers and provide ad hoc, real-time valuation services along with software support and project management. Numerix is actively aggregating existing trade information from all of LBHI’s legacy systems onto a single platform – Numerix Portfolio – and providing independent valuations on the entire LBHI book.
The selection of Numerix was approved by the US Bankruptcy Court, Southern District of New York (Manhattan) in April this year.
A lot of column inches have been devoted to the impact of Lehman’s failure on the market over the last 12 months but there has been very little detailed coverage of the unwinding process. This valuations deal is part and parcel of this process and it indicates the scale of the data management challenge that has resulted from the events of last year.