AS Lehman Brothers secured court approval to begin the sale of key North American units to Barclays bank, its negotiators out of court neared a deal to sell parts of the business Barclays had not yet claimed, starting with its prized money management business.

Yesterday, Lehman secured a judge's approval to proceed with the process of selling its investment banking and trading operations, which Barclays PLC of Britain has agreed to buy. Judge James Peck is expected to consider final approval of that deal on Friday.

Lehman, which filed the biggest bankruptcy in US history on Monday, is trying to unload its assets and potentially save thousands of jobs. A person familiar with the negotiations, who spoke on the condition of anonymity because the talks are ongoing, said Lehman was close to announcing a deal for the investment management division that includes its Neuberger Berman money management unit.

Private equity firms Hellman & Friedman and Kohlberg Kravis Roberts & Co. are among the bidders, the person said. A deal could be announced within the next few days, he said.

Neuberger Berman was once valued as high as $10 billion by Wall Street analysts, but now could fetch much less considering Lehman's bankruptcy filing.
Meanwhile, Lehman is also trying to sell global operations not covered under the Barclays deal, or others to go along with the investment management division.

In court, Lehman got a bankruptcy judge's initial approval of the sale of assets including its North American investment banking and trading operations, its Manhattan office tower and two New Jersey data centers to Barclays for $1.75 billion in cash.

The judge's approval sets in motion the asset sales but leaves open the possibility of a competing bid before Friday's hearing.

Lehman lawyers said the investment bank needed to close the deal quickly to preserve the remaining value of its assets. The agreement with Barclays calls for the deal to close within a week, on or before Sept. 23.

Peck agreed that moving forward quickly was important in light of the financial stability that has reshaped Wall Street and created economic uncertainty in markets around the world.

"I think to delay the approval of the sale procedures would send an intolerably awkward message to the world, and I'm not prepared to preside over the delivery of that message."

The judge also approved Lehman Brothers' request for a $100 million breakup fee plus $25 million in expenses to be paid to Barclays if the deal fails and a competitor wins out.

Lawyers for creditors and bondholders objected to the size of the breakup fee and the speed of the process, saying two days was not enough time to evaluate the deal much less put together a competing bid.

But Peck declined to delay the approval of the bidding process and said, "There is effectively one logical purchaser for these assets."

"That purchaser has already identified itself, has been identified publicly to the markets, has been identified publicly to the employees and represents the continuity for this operation," he said.

Lawyers for the Federal Reserve Bank of New York, the Securities and Exchange Commission and JPMorgan _ which believes it could be the company's biggest creditor _ supported the sale effort.

As part of the deal, Lehman secured a the retention of 200 "key" employees and another eight employees determined to be "critical" to the company's success. Barclays also agreed to a potential liability of $2.5 billion in severance if it ultimately decides not to keep some or all of 10,000 US-based employees.

Lehman said in court filings that it was putting up Neuberger Berman as collateral for a $450 million loan from Barclays to pay lawyers, financial advisors and employees as the British bank works toward closing the deal. The judge said late yesterday that he would approve the $450 million in loans from Barclays, subject to proper documentation.

Barclays said yesterday it may also pick up some of Lehman Brothers assets and employees in Europe and Asia.

Barclays President Robert D. Diamond Jr. said in a conference call with analysts that Barclays' interest was primarily in the US cash equities business, as part of the company's goal to boost its earnings from North America.