0001 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION 2 3 TRANSCRIPT OF RECORDED TELEPHONE CONVERSATIONS 4 FILE NAME: OSNATO Decl Ex 33-Ledford9-15-081234pm 5 6 7 8 9 10 11 12 13 14 15 16 17 18 19 20 21 22 23 24 25 0002 1 [DIAL TONE -- DIALING SOUNDS] 2 RUTH: Hey, Patrick. 3 MR. LEDFORD: Hey, Ruth. 4 RUTH: Okay, hold on. Let me get Peter on the 5 line. 6 MR. LEDFORD: Thank you. 7 [music] 8 RUTH: Hi, Patrick? 9 MR. LEDFORD: Yes, -- 10 RUTH: Okay. I have Peter on the line. 11 MR. LEDFORD: That was Bruce Senior on the 12 phone. That's the reason I had to put you guys -- call you 13 guys back. He's in Italy. Left -- 14 RUTH: Oh. 15 MR. LEDFORD: -- last night, so -- for a week's 16 vacation. So, that means everything. 17 RUTH: Um hmm. 18 MR. LEDFORD: So anyway, that's kind of the 19 backdrop. You know, as I get more information, I'll let 20 you guys know. But, we are in a -- I know the Bents are in 21 the process of putting together a -- you know, a capital 22 support program. 23 RUTH: Do you know which bank will be -- 24 MR. LEDFORD: No, I don't have any of the 25 details. Nobody shared that with me. 0003 1 PETER: And -- 2 MR. LEDFORD: Go ahead. 3 PETER: -- the -- would the support be for just 4 the 20-cent difference in fair value and [inaudible] -- 5 MR. LEDFORD: You know, I -- I asked Kate 6 Crowley, our general counsel, that. Peter, that's a good 7 question. We don't know yet. I'm hoping it's going to be 8 more than that, and I have to assume it's going to be. And 9 just from a marking perspective, I mean, it -- it's not 10 going to help a lot to -- if it's, you know, it's just a 11 fraction of what our exposure is. 12 But then, again, I have to think that maybe 13 that's not realistic to put something in place for the 14 entire par amount, because, I mean, that's going to be 15 very, very expensive, as you guys can imagine. 16 PETER: Um hmm. Yeah, just from -- from 17 backdrop with others who have had, say, SIV problems in the 18 past, -- 19 MR. LEDFORD: Yes. 20 PETER: -- those, because they were of the 21 asset-backed variety, you know, there was a pool of 22 underlying assets dedicated to those funds being held. So, 23 there was some, you know, realizable economic value, so 24 arguing that they were zero was real irrational, and saying 25 they're par based on the underlying assets was also 0004 1 irrational. So, there was some, you know, fair value of 2 what those assets, if they were to be liquidated, would be 3 for those securities, -- 4 MR. LEDFORD: Um hmm. 5 PETER: -- and then funds came in and supported 6 the difference. 7 MR. LEDFORD: Um hmm. 8 PETER: And, on average, it was anywhere from, I 9 don't know, 40 to 60 cents on the dollar. 10 RUTH: Um hmm. 11 MR. LEDFORD: Okay. 12 PETER: Now with these, because this is just 13 traditional CP, not asset-backed, in most cases that we 14 know of, it's [unintelligible] the ability of Lehman to pay 15 you back, which if they're [unintelligible], or bankrupt, 16 or [unintelligible], whatever it is, there is no tangible 17 best case directed for your securities. You know, you're 18 thrown in there with everybody, so -- 19 MR. LEDFORD: It would be -- well, yeah, the 20 only -- the only caveat there, though, Peter, is that we -- 21 is that what we own is senior. The CP comes under the same 22 category or it's pari passu with senior debt, unsecured 23 senior debt. So, you're absolutely right. 24 PETER: Understood -- yeah, understood. But 25 it's just that with asset-backed, you have a specific asset 0005 1 that's backing those securities. Here, you're in with 2 everyone else, so the -- 3 MR. LEDFORD: Well, we're -- 4 PETER: -- the [inaudible] -- 5 MR. LEDFORD: -- but, we're in the -- 6 PETER: -- price up to 75 cents that everyone is 7 going to potentially quote would -- would -- might be the 8 value we're looking at. 9 MR. LEDFORD: Yeah. Well, again, we're not 10 thrown in with all the creditors. We're thrown in -- I 11 mean, you've got the secured creditors, obviously. Then, 12 you've got the senior debt holders, which we are. And 13 then, you've got the -- behind that, I believe you would 14 have the subordinated debt, and then the -- the junior 15 subordinated debt. So -- and, in fact, if you -- 16 PETER: Well, that's it. 17 MR. LEDFORD: Yeah, so -- 18 PETER: [inaudible] treat everyone on the senior 19 level the same, but you will still be in a pool of others 20 -- 21 MR. LEDFORD: Oh, we -- 22 PETER: -- that all have [inaudible] 23 MR. LEDFORD: -- Peter, I agree with you 24 completely. I agree with you completely. 25 PETER: I just didn't want -- you know, as we 0006 1 meet on our end, and talk through issues and concerns, and 2 I just don't want there to be a miscommunication that, you 3 know, you come back and say, "Well, we priced it at 80. We 4 have support for the other 20. We're -- we're -- we're 5 good," -- 6 MR. LEDFORD: I don't think that's -- 7 PETER: -- and then our committee -- 8 MR. LEDFORD: Yeah. 9 PETER: -- okay, and our committee meets and 10 says "We believe it's probably something like 40" -- I'm 11 just throwing a number out -- and then we're going to look 12 for funds who are rated to have something covered there, or 13 stress the portfolio with the 40 cents on the dollar, and 14 see what that does to the N.A.V., and then take rating 15 action if necessary -- 16 MR. LEDFORD: Yeah. 17 PETER: -- at that point. 18 MR. LEDFORD: No, no, I understand. 19 PETER: So, I just wanted you to -- we don't 20 want to get to that point, and you go, "Well, he didn't 21 tell me that. If I knew that, I could" -- 22 MR. LEDFORD: Well, I hope we're not going to 23 get to that point, because as you guys know, it's -- if, 24 for any reason, our rating is -- is -- is yanked, then, you 25 know, that's the kiss of death for us, because we'll just 0007 1 continue to -- I mean, outflows will escalate and -- 2 PETER: I understand. 3 MR. LEDFORD: -- I mean, it would be -- 4 PETER: [inaudible] 5 MR. LEDFORD: Oh, very, very difficult 6 situation. It's just unbelievable. 7 As soon as I get something back, it may be late 8 this afternoon, though, because I was on the phone earlier 9 with your illustrious colleague, Henry Shilling, over at 10 Moody's, and, you know, he's -- he's -- what he's saying is 11 very consistent with what you guys just outlined, which I 12 agree with completely. 13 PETER: Okay. 14 MR. LEDFORD: Completely. We -- I guess, let me 15 make us just a little more comfortable with this situation 16 -- well, not to make us comfortable, but less concerned, I 17 guess, to some extent, is that in that we will be paid, you 18 know, more than 60 cents on the dollar, and I think it will 19 be closer to about 80 to -- you know what I mean? And 20 maybe potentially we could even get out whole at a hundred 21 percent on the dollar. I would, at this point today, not 22 having all the facts, I would assign a low probability to 23 that, but I certainly think it's going to be 80 or better. 24 And, if you look at the balance sheet and the assets, and, 25 you know, where we are, and again, granted, we're going to 0008 1 be thrown into that pool of -- just of unsecured senior 2 credit creditors, I have to think that, you know, that 3 we're going to make out okay. Not great, obviously, but 4 we're going to be made out okay here. 5 But, you know, the other thing that -- that, of 6 course, bothers me, too, is this -- I mean, this thing 7 could take -- because we are -- we are not a secured credit 8 holder, I mean, this thing could take, you know, 12 months 9 to work out. So, -- 10 RUTH: Yeah, and just so you know, in terms of 11 some background with the -- the capital support agreements, 12 you know, just in the past we've had some companies come 13 back and forth with us, you know, put -- sending us draft 14 versions. 15 So, you know, we wanted to let you know that 16 you're encouraged to, you know, send us drafts, if you'd 17 like, just to make sure that we're all on the same page and 18 on track with specific criteria issues that may come up. 19 Because, you know, I just wouldn't want something to be 20 signed, sealed, delivered, and then have an issue with it. 21 MR. LEDFORD: Oh, sure, sure. You know, you -- 22 I'm -- actually, some [unintelligible] as you guys can 23 imagine, I'm kind of not totally out of the loop with what 24 the Bents are doing, but on some of this stuff, they're -- 25 they're -- they're -- I'm not -- I guess you could say I'm 0009 1 -- maybe I'm not necessarily in the loop. Because I know 2 they had a one-on-one discussion with -- with Henry 3 Shilling at Moody's, and I wasn't privy to that, and -- and 4 then Henry, the only reason I knew that he had already 5 talked to both -- both Bruces was Henry called me, wanted 6 to know, you know, how I was doing. 7 RUTH: Um hmm. 8 MR. LEDFORD: And -- and he mentioned it. So, 9 but -- and then, we just had a -- I just had a meeting with 10 our head of sales, John Drahzal, and Kate Crowley, and -- 11 and with Bruce II, and Bruce reiterated that, you know, 12 that he -- they're putting something together very quickly 13 here, on -- on that -- that capital support. 14 So again, I just don't know all the details yet, 15 but as soon as I get them, you guys will be the first to 16 know. 17 RUTH: Okay. Or if, you know, Bruce II wants to 18 call us directly, you know, that's fine. 19 MR. LEDFORD: Well, I'm going to just -- when we 20 hang up here, I was going to shoot him an e-mail, and give 21 him an update, and -- and, yeah, he may -- you know, he may 22 reach out to you guys. So, -- 23 RUTH: Okay. 24 MR. LEDFORD: And, I'll give him your contact 25 information. Ruth, I'll -- I'll give him your number, if 0010 1 that's okay. 2 RUTH: Yeah, that's fine. 3 MR. LEDFORD: And then you can -- 4 RUTH: Patch in Peter. 5 MR. LEDFORD: Yeah, get Peter involved. 6 RUTH: Sure. 7 MR. LEDFORD: I wish I had something positive to 8 say. 9 PETER: All right. 10 RUTH: Yeah. 11 PETER: Yeah, I know, it's -- 12 MR. LEDFORD: Because this is like -- 13 PETER: -- it is what it is. 14 RUTH: Yeah. 15 MR. LEDFORD: -- it's just fucking horrific. 16 I'd like to -- you know, honestly, I'd like to -- sitting 17 here, I'm thinking, you know, this is going -- we're going 18 to get through this, we're going to get through this, we're 19 going to get through this. But, you know, I haven't seen 20 the market like this in 30 years. I mean, this is, like, 21 depression. 22 RUTH: Um hmm. 23 MR. LEDFORD: This is just ugly, ugly, ugly as 24 hell. I still can't -- I'm still trying to digest the fact 25 that the -- you know, that the Fed just had -- the Treasury 0011 1 has had weeks to find a strategic partner for -- for Bear 2 and, you know, and they -- and, you know, stuck to their 3 guns and wouldn't provide any type of backstop, and that's 4 -- and here we are today. 5 You know, I mean, I -- maybe it was -- maybe it's 6 -- there's an element of politics in there, that they -- 7 they didn't want to go down that path if they bailed out 8 another, you know, dealer. But, you know, I think the -- 9 at the end of the day, I think it would have been better if 10 they had, in fact, bailed them out, at least in the -- in 11 the short term, short run. 12 But, I mean, this is frickin' -- this is frickin' 13 ridiculous. Are you guys -- what about the other money 14 founds out there that have exposure to Lehman? Are you -- 15 you guys are reaching out to them, obviously? 16 PETER: Yup. 17 RUTH: Yup, yeah. 18 MR. LEDFORD: Okay. 19 RUTH: We've been on -- 20 MR. LEDFORD: And, you're -- basically, they're 21 -- they're providing capital support programs? 22 PETER: Yeah, a few are. You know, I know 23 Wachovia posted something -- 24 MR. LEDFORD: Yeah, I saw that, yeah. 25 PETER: -- last night. But, others, yeah, are 0012 1 in discussions, and, you know, a lot of them -- a lot of 2 funds, thankfully, just have repo, -- 3 MR. LEDFORD: Uh huh. 4 PETER: -- that's [unintelligible] overnight, so 5 they got paid on those today, which was good to see. And 6 then, the other CP holders are just, you know, trying to 7 work out the details. 8 MR. LEDFORD: Hmm, okay. Well, I'll be back 9 when I get more details. If you guys don't hear from me by 10 4:00, though, Ruth, we'll have a call in, and I'll -- I'm 11 going to shoot Bruce II an e-mail, just recapping our 12 discussion and encourage him to reach out to you guys. 13 RUTH: Okay, great. All right. 14 PETER: Thanks. 15 RUTH: Thanks, very much. 16 MR. LEDFORD: All right. I'll talk to you 17 later. 18 PETER: Right, take care. 19 RUTH: 'Bye-bye. 20 [END OF RECORDING] 21 22 23 24 25 0013 1 C E R T I F I C A T E 2 3 I, June Accornero, hereby certify that the 4 foregoing transcript consisting of 13 pages is a complete, 5 true and accurate transcript of the recorded conversations 6 contained in the recording labeled "OSNATO Decl Ex 33- 7 Ledford9-15-081234pm." 8 The foregoing transcript has been typed and 9 proofread by me. 10 11 ____________________________ ______________ 12 Typist/Proofreader Date 13 14 15 16 17 18 19 20 21 22 23 24 25