Lehman Brothers Japan files for bankruptcy

Compiled From Kyodo, AP

Lehman Brothers Japan Inc. said Tuesday it filed for bankruptcy protection with the Tokyo District Court following the collapse of its parent firm, becoming Japan’s second-largest postwar corporate failure in debt terms.

The Japanese unit of U.S. securities house Lehman Brothers Holdings Inc. and its Japanese holding company invoked the Civil Rehabilitation Law for the filing.

According to a private credit research agency, the liabilities of the two firms came to a combined sum of about ¥3 trillion as of Aug. 31.

“Combined liabilities are estimated at ¥3 trillion, though it may vary,” Tokyo Shoko Research said.

The fourth-largest U.S. securities house filed for bankruptcy protection Monday in New York after bailout talks faltered over the weekend.

Shortly after the filing, the Financial Services Agency ordered Lehman Brothers Japan to suspend operations through Sept. 26 after receiving a report from the Japanese unit that warned it might default on its obligations in the longer term.

As a precaution to protect local investors, the FSA also ordered the unit to keep certain assets within Japan to prevent them from being transferred to other units and affiliates outside the country.

Lehman Japan manages assets worth about ¥1.2 trillion, mainly for institutional investors, according to the agency.

“To ensure fair treatment for all creditors and that the rehabilitation procedures are carried out in an orderly manner, the companies are working with the relevant Japanese regulatory authorities and are in the process of ascertaining its financial process,” Lehman Brothers Japan said in a statement.

The U.S. investment bank opened the Tokyo branch in 1986 and expanded by taking stock orders for foreign investors and playing the bond market.

The unit, which employs 1,300, recently made headlines after providing ¥80 billion to Internet service firm Livedoor Co. to finance its purchase of a controlling stake in Nippon Broadcasting in 2005.