In the five years since 7.56am on Monday 15 September 2008, when a judge put the UK arm of Lehman Brothers into administration, Tony Lomas has been unravelling the $1.1bn (£700m) of assets and liabilities inside the collapsed bank.
Even for this partner at the accountants PricewaterhouseCoopers (PwC), who has unwound companies as diverse as the Maxwell empire and the British arm of collapsed energy group Enron, the sums involved that fateful and unforgettable Monday morning were eyewatering, even scary.
The 56-year-old restructuring expert had watched the minutes ticking on the clock awaiting the decision from the judge, knowing the London market would start trading at 8am and that mayhem could unfold. He did not want to contemplate what might happen "as soon as 8 o'clock came and the payments were due".
Even now, five years on, he admits he finds it hard to believe that the US authorities allowed Lehman Brothers to fail, causing the domino effect on its entities around the world. Sitting in his corner office high up on the 23rd floor in a Canary Wharf tower, Lomas recalls: "I was disbelieving that it could have been allowed to happen because I could see what would unfold would be immense."
Unlike many of the other administrations the industry veteran has worked on, Lomas had barely any warning that Lehman was heading for the wall. It was a Saturday night and he was having a Chinese meal with his family in his favourite Essex restaurant when he took a call from Elizabeth Lee, lead lawyer for Lehman in London, who had been advised to prepare for the possibility that that the Wall Street firm might go bust over the weekend. She told Lomas she needed him to make plans – completely in secret – in case a rescue operation for Lehman across the Atlantic failed. "I started to have confidential conversations with my relevant service line leaders. If we had to walk in on Monday morning, I needed an army," Lomas said.
But it was all about trust. "Lehman hadn't gone bust. I was only there in case it did," he said.
The events that unfolded that weekend have now gone down in history as some of the dramatic in the financial world. No one had expected Lehman Brothers to fail – the US authorities had orchestrated a takeover of another troubled firm Bear Stearns only six months earlier – and the decision by the US to refuse to rescue it led to fears about the stability of other banks.
Once the judge pulled the plug , Lomas needed to set about understanding the structure of the bank – formally known in the UK as Lehman Brothers International (Europe) – and finding out if he could pay the 5,500 staff based at the London headquarters of 25 Bank Street. He had to find the money to pay the staff, as £3bn of cash had been swept across the Atlantic on the Friday night to the parent company. With the parent bankrupt, the London arm had no money to pay it staff or make payments on any of its bills.
Lomas admits that the next 10 weeks were chaotic as his team tried to assemble a plan. Within the first days, 2,500 staff transferred to Japanese bank Nomura, which took on the equities business in Britain. By Christmas the headcount had fallen to 700 and shortly afterwards reached 500.
Now Lehman Brothers International (Europe) employs 500 staff – including frontline traders and back office lawyers – complemented by 200 or so from PwC, all under Lomas. He points out that the operation is still a bank, regulated by the Financial Conduct Authority.
"We've recruited. Many were previously here, others were not. We've gone out of our way to create a business-as-usual environment. We provide rewards, we pay market [rates]. We have a training programme, we have objective-setting and appraisals. There are bonus systems and promotion and disciplinary procedures. This is a business," Lomas says.
Five years ago, his concern had been about the risks of taking on a job that was so big and unprecedented. "I was thinking about the big risk for PwC. Would we be able to control the risk? The value would be eroded and we would be blamed and it would take a long term to control the situation. When stakeholders and customers of the bank are at risk of losing hundreds of millions or billions of pounds, situations can become very litigious and those are very scary numbers to be litigated," he said.
For the most part, the situation did not spiral out of control. Some hedge funds had money locked into Lehman, with shares in banks and other entities, and needed it back. Walking in the door of 25 Bank Street – now the offices of JP Morgan – Lomas said he drew upon plans his company had used (and are still using) to unravel the UK arm of Enron, which collapsed in 2001.
The experience led to his discussing with regulators ways to draw up contingency plans for banks in the future. Ideas like this have become known as living wills – though five years on from the crisis few are yet ready to be tested and Lomas gesticulates that such a plan could easily create a 2ft-high paper stack. If he had one for Lehman, it "might have removed 25% of the uncertainty and reduced the instability and the chaos, but people would still have panicked".
This month he intends to make another payment to creditors on top of £13.6bn already handed back and admits that the 10-year lease in the corner of Citigroup's tower in Canary Wharf will expire before the job is done. He will have retired – PwC requires partners to leave at 60 – but he can already see creditors in Lehman getting their money back, racking up fees of £1bn for PwC in the process.
"There is a reasonable chance now that we have enough money to pay the ordinary unsecured creditors in full. Then there is the shareholder claims. At that level of recovery, I've still got enough money. It is possible in due course that we will prove this company was balance-sheet solvent. It didn't fail the balance-sheet test. What it failed was the cashflow test – it couldn't pay its debts when they fell due."
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