Bloomberg News

Lehman Liquidation Plan Backed by $450 Billion in Claims

November 30, 2011

(Updates with deadline in second paragraph.)

Nov. 29 (Bloomberg) -- Lehman Brothers Holdings Inc. won support for its latest payout plan from more than 150 creditors holding about $450 billion in claims, moving it closer to paying some of its debts, the defunct firm said.

Lehman, which filed the biggest bankruptcy in U.S. history in September 2008, had said it can probably get a judge’s approval for a $65 billion liquidation plan next month to pay an estimated $370 billion in final claims, with the first distributions starting early next year. The company, whose creditors range from JPMorgan Chase & Co. to the New York Giants and individual bondholders, gave its vote count in court filings today after a Nov. 4 voting deadline.

Lehman quickened its effort to get out of bankruptcy in July, after being mired in disputes as it neared three years in Chapter 11 proceedings. The defunct firm settled a fight with creditors by allotting more money to a group including Goldman Sachs Group Inc. and less to bondholders such as Paulson & Co. Both groups had proposed rival plans to pay Lehman’s debts.

“To have achieved substantial consensus leading to the agreement of proponents of competing plans to support this debtors’ plan borders on the miraculous,” Lehman said in a filing, citing the judge handling the case.

The plan was accepted by all classes that voted, Lehman said in a filing. Liquidators of 87 of Lehman’s foreign affiliates also are in support, it said.

Disputes Remain

By October, Lehman had backing from $160 billion in claims, probably enough already to confirm the plan, said Daniel Ehrmann, head of international operations. Still, disputes remain that will make the forthcoming Dec. 6 court hearing “complicated,” said Stephen Lubben, a bankruptcy law professor at Seton Hall University in Newark, New Jersey, in an interview last week.

Lehman this month subpoenaed Goldman Sachs for documents relating to derivatives claims. Deutsche Bank AG, after backing Lehman’s third payout proposal, said last month the plan won’t succeed unless Lehman upgrades $2.4 billion in claims held by the German bank. Many banks are fighting Lehman over its handling of derivatives contracts, including JPMorgan -- which also is battling Lehman over $6 billion in separate claims --and Deutsche.

By September, creditors holding $140 billion in claims backed Lehman’s plan, up from $100 billion in July.

Lehman Chief Executive Officer Bryan Marsal has said he intends to raise a total of $65 billion from the firm’s assets in the next few years, including cash already in hand. Lehman and its affiliates had more than $23 billion of cash available on Oct. 31 after spending almost $1.5 billion in fees for managers and advisers, according to a filing.

Lehman filed for bankruptcy with $613 billion in debt.

The case is In re Lehman Brothers Holdings Inc., 08-13555, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

--With assistance from Dawn McCarty in Wilmington, Delaware, and William Rochelle in New York. Editor: John Pickering

To contact the reporter on this story: Linda Sandler in New York at lsandler@bloomberg.net

To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net


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