Lehman to sell 45% stake in R3 hedge fund

Lehman to sell 45% stake in R3 hedge fund

New York: Lehman Brothers Holdings Inc agreed on Wednesday to sell its 45% stake in hedge fund R3 Capital Partners for $250 million in cash and a $250 million investment in another fund managed by R3.

Lehman, which filed for bankruptcy protection last month, acquired the stake in May in return of a roughly $1 billion investment, according to document filed in US Bankruptcy Court in Manhattan.

R3 Capital is run by Richard Rieder, a former head of global principal strategies at Lehman.

Lehman owned the non-voting, minority ownership stakes in the master fund, general partner, special limited partner and management company of R3 Capital Partners, an asset manager of funds investing primarily in corporate bonds and loans.

In the second quarter, Lehman sold assets and transferred derivative risk of about $4.5 billion at fair value to R3. The assets sold were primarily corporate bonds and loans.

The agreement, which needs to be approved by the bankruptcy court, is the latest development in the unwinding of the failed investment bank, which has been selling various businesses.

The investment bank also held minority stakes in other funds such as Ospraie Management LLC and GLG Partners.

Under the terms of the agreement, the buyer will pay $125 million in cash at closing and another $125 million as a promissory note to account for the cash consideration, according to court papers.