Summary
This Form 8-K filing by The Bank of New York Mellon Corporation (BK) on October 6, 2008, primarily addresses the financial obligations arising from the Lehman Brothers bankruptcy, which occurred shortly before this filing. The report details the company's commitments to support clients and funds that held debt securities issued by Lehman Brothers. Specifically, BK is entering into agreements to cover potential losses and ensure certain fund values are maintained for several commingled cash funds and liquidating accounts. These arrangements are designed to mitigate the impact of Lehman's default on these clients, although they represent a direct financial obligation for BK. The filing also reiterates a previously announced estimated after-tax charge of approximately $425 million for the third quarter related to these support measures.
Key Highlights
- 1BK is formalizing obligations to support clients impacted by the Lehman Brothers bankruptcy, particularly those invested in money market and cash sweep funds holding Lehman debt.
- 2The company has entered into agreements with four liquidating accounts for commingled cash funds, agreeing to pay up to approximately $235 million to cover losses on Lehman debt securities.
- 3Capital support agreements have been established with EB Daily Liquidity Money Market Fund, with a potential payout of up to approximately $4.38 million related to Lehman debt.
- 4BK has also amended previous capital support agreements with several Dreyfus funds (Dreyfus Liquid Assets, Dreyfus BASIC Money Market, Dreyfus Worldwide Dollar Money Market, and Dreyfus Cash Management Plus), with a maximum aggregate commitment of approximately $238 million.
- 5The company anticipates further arrangements with securities lending customers regarding losses on Lehman debt held in funds related to cash collateral reinvestment.
- 6The total maximum aggregate amount BK may be called upon to pay under these specific new and amended agreements detailed in this filing is approximately $477.38 million ($235M + $4.38M + $238M).
- 7This filing does not alter the previously disclosed expectation of an approximate $425 million after-tax charge for Q3 2008 related to client support.