The Ghost Of Lehman.



The Dead Are Alive.
     

      No, this isn’t a hark back to the opening line from ‘Spectre’ and it isn’t a cryptic message leading up to The Undertaker’s impending return at WrestleMania 32. And just for the record, this certainly isn’t a nonsensical tweet, on the lines of those from a certain ‘Yeezy’, who has also, in what can only be termed as acts of blasphemy, insulted both Taylor Swift and Wiz Khalifa. Incidentally, Mr. West has also made public his intention to run for President of the United States of America in 2020. That’s Cray, Dawg.

     And now, it’s time to cut to the chase. In late 2008, Lehman Brothers collapsed into bankruptcy after no other American bank was willing to touch it or its toxic assets with a bargepole for a bailout. Its chief, Richard Fuld went on to become America’s most hated man, for having triggered the worst financial crisis that the world had seen, ever since the Great Depression of the 1930s. And in the midst of a financial crisis that swallowed several banks, Barclays and Nomura eventually acquired what was left of the tainted, star – crossed company. But if the world thought that it had seen the last of Lehman, it was sorely mistaken. For, its spirit would soon rise from the grave and return for redemption. And no, Lehman Brothers’ featuring in ‘Despicable Me’ as the ‘Bank Of Evil’ isn’t the focal point here. In fact, Lehman’s apparition was all set to rise from the dead, thousands of miles away from Wall Street. Lehman’s resurrection happened in a certain country that we call India.

     While Lehman Brothers may have sunk to Davy Jones’ locker in the carnage that hit the financial markets, a fragment of it continued to exist in a certain avatar, half a world away. In the tropical paradise and tax haven of Mauritius, a series of funds run by Lehman Brothers survived through the crisis, escaping public eye and regulatory scrutiny. The largest was a fund that went by the name LB India Holdings Mauritius I Limited and the others included LB Mauritius I Limited and LB Mauritius IV Limited. But were these funds merely shell entities that sat idle and did nothing but take in the Mauritian sun? Not on Kanye’s life. 

     Over the years, the funds had garnered stakes in listed Indian companies such as Cox and Kings, Moserbaer, Edelweiss, Tulip Telecom and Orchid Chemicals. One of their core investments was a sizeable 20% stake in an Indian company called KSK Energy, which was incorporated in Mauritius. Parented by the London – listed and Isle Of Man – incorporated KSK Holdings, KSK Energy is a thermal and hydro – power major. Lehman had invested in the company in its early days and had supported the company in its growth phases, all the way through its IPO, leading up to 2011. At one point of time, KSK and Lehman had formed a joint venture in which the latter held close to 90% before it sold its stake back to KSK. But as far as Lehman was concerned, with its parent long dead and investors clawing to reclaim even a morsel of the money that they had lost when the financial giant went belly up, the funds were destined for closure. And in 2011, with the New SEBI Takeover Code in place, the funds wanted an exit from KSK, even as KSK’s promoters looked to increase their stake in the company. 

     With the Lehman funds heading for liquidation, the KSK Group agreed to waive a lock – in on the shares and an open offer for the 20% stake held by the Lehman funds was launched by the promoters of KSK Energy, at a price of Rs. 125 per share, amounting to $190 million. The open offer, strung together by Enam Securities (now a part of Axis Capital), sailed through successfully and the promoter stake in the company, which stood at 54.94%, soon scaled up to 74.94%. This was an open offer that was launched, specifically targeted at offering a strategic exit route to a fund. Funds normally tend to exit a company via an IPO, a selective buyback or another investor buying their chunk of shares. An open offer is normally used to offer minority shareholders an exit option. KSK Energy, however, was a unique case of an open offer being used to provide a large investor a stake sale route and facilitate its exit from the company.

     Not much has been heard since about what happened to the Lehman funds but it is of common opinion that they were wound up and followed Lehman Brothers to the abyss. While the funds largely went unnoticed at the time of Lehman’s bankruptcy, it was only when investors realized that their hard earned money had been lost to the hubris and crony capitalism that was Lehman, did they come after Lehman’s funds for their pound of flesh. And Lehman, long thought to be resting in peace by the world at large, rose from the dead and returned for redemption. 

     The Indian markets, for what they were worth, certainly didn’t see it coming. After all, even to this day, KSK Energy is still one of the lesser – known companies and Lehman’s stake in it was a well – kept secret. Lehman chose to rise from the dead when it did, sold its stake, repaid its investors and then returned to the financial graveyard whence it came. And as far as KSK Energy was concerned, it was an open offer that was well and truly one that came from beyond the grave.



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