Bloomberg News

Lehman to Seek Approval for Plan to Boost First Creditor Payout

February 22, 2012

Feb. 22 (Bloomberg) -- Lehman Brothers Holdings Inc. is set to ask a judge today to approve a plan that would allow it to boost its first payment to creditors after more than three years in bankruptcy.

The defunct investment bank has about $18 billion of cash available, it said earlier this month. In theory, it could give creditors $12 billion to $14.7 billion initially, depending on how much cash it needs to keep in reserve for disputed claims, it said in a filing in U.S. Bankruptcy Court in Manhattan. Few objections remain to the plan to limit cash reserves, which would boost the payout by $2.8 billion, and should be overruled, Lehman said yesterday.

Lehman, whose creditors range from Goldman Sachs Group Inc. to individual bondholders, hasn’t set an exact amount for the payout scheduled for this quarter. Last month, it said it may initially distribute $8.1 billion to $10.7 billion.

To boost the payment to the higher end of the range, New York-based Lehman is asking the judge to let it keep non-cash assets as reserves for disputed claims. Yesterday, it said it had settled its differences with most indenture trustees for mortgage securities, who hold large disputed claims, by valuing the claims at $5 billion.

Citigroup Inc., Deutsche Bank AG and other trustees faulted an earlier proposed estimate of the claims at $2.4 billion, down from the $37 billion they filed.

Firm’s Assets

Lehman Chief Executive Officer Bryan Marsal has said he intends to raise $65 billion from the firm’s assets in the next few years, giving the average creditor less than 18 cents on the dollar for estimated claims of about $370 billion.

Last month, Lehman said it would make a total of about $56 billion in distributions to creditors over the next few years. It put disputed claims at $112 billion.

Lehman, which in 2008 filed the biggest bankruptcy in U.S. history under former Chairman Richard Fuld, has winnowed down claims from 67,000 filed originally demanding about $1.2 trillion from what was once the fourth-largest investment bank. It 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).

--Editors: Mary Romano, Andrew Dunn

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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