Bloomberg News

Lehman Fees to Marsal Firm Top $500 Million in 39½ Months

February 03, 2012

(Updates with total fees in second paragraph.)

Jan. 20 (Bloomberg) -- Lehman Brothers Holdings Inc.’s fees to restructuring firm Alvarez & Marsal LLC have topped half a billion dollars in 39 1/2 months, according to a court filing.

The firm, whose co-founder Bryan Marsal runs the defunct investment bank, charged $504.2 million through December for “interim management,” including $8 million last month, according to the filing with the U.S. Securities and Exchange Commission.

Lehman, which has spent almost $1.6 billion on fees since filing the biggest bankruptcy in U.S. history in September 2008, paid $54.1 million to lawyers and managers in December, according to the filing.

Lehman’s bankruptcy became America’s most costly in April 2010, when it surpassed the $757 million cost of Enron Corp.’s three-year liquidation, according to data assembled by bankruptcy professor Lynn LoPucki at the University of California, Los Angeles. The failed energy trader’s investors were paid 53 cents on the dollar, while Lehman’s $65 billion liquidation plan would give the average creditor less than 18 cents, according to court documents.

“It reflects the difference between a real economy company -- even one with massive fraud -- and a financial institution,” said Stephen Lubben, a bankruptcy law professor at Seton Hall University in Newark, New Jersey. “So many of the assets of a financial institution just vaporize upon bankruptcy.”

New York-based Weil, Gotshal & Manges LLP, Lehman’s lead bankruptcy law firm, has earned $375.1 million, including $8.5 million in December.

Hourly Bills

Marsal, who bills Lehman hourly, has said he will start distributing some cash to the defunct investment bank’s creditors by next year, more than three years after the bankruptcy filing. He has court approval for the $65 billion liquidation plan that intends to raise about $40 billion in the next few years, excluding cash on hand, according to court papers.

Lehman and its affiliates were holding cash and investments of $28.1 billion on Dec. 31, compared with $27.2 billion on Nov. 30. About $2.9 billion of the December cash wasn’t available for use, according to the filing.

Lehman’s creditors range from Goldman Sachs Group Inc. and hedge funds to the New York Giants and Abu Dhabi Investment Authority, as well as individuals who hold Lehman bonds. Once the world’s fourth-biggest investment bank, Lehman filed for bankruptcy with assets of $639 billion.

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

--Editors: Fred Strasser, Glenn Holdcraft

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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