Lehman brokerage, Europe unit settle $38 billion in claims

NEW YORK, Fri Oct 5, 2012 – The U.S. brokerage unit and a European unit of the former Lehman Brothers Holdings Inc. said they settled a dispute over $38 billion in claims over client and creditor assets, a major step toward allowing customers and creditors to recover money.

Lehman Brothers Inc. and Lehman Brothers International Europe announced the agreement in principle in a joint statement on Friday.

The accord requires approval by U.S. Bankruptcy Judge James Peck in Manhattan as well as by the English High Court.

On Thursday, the U.S. brokerage unit announced a separate agreement with its former Swiss-based derivatives unit Lehman Brothers Finance AG.

Taken together, the agreements resolve two of the biggest outstanding claims facing the U.S. brokerage unit.

Friday’s agreement “sets the stage for distributions that will provide for 100 percent recovery of customer property,” said James Giddens, the trustee for the Lehman brokerage unit.

Tony Lomas, joint administrator of LBIE, said the accord allows it to focus on how to distribute more than $7 billion of client assets.

Under the agreement, the European unit will be allowed $8 billion in claims for customer accounts. The accounts include $7.5 billion in securities and cash and $500 million in cash net equity.

The unit will also be entitled to a $4 billion general property claim, plus $600 million of “post-filing income.” Lehman Brothers Inc.’s $13.8 billion unsecured claim against the European unit will be eliminated.

In March, the parent company emerged from the largest U.S. bankruptcy in history after 3½ years in Chapter 11. Lehman had been Wall Street’s fourth largest investment bank.

Lehman Brothers emerges from bankruptcy

NEW YORK – Tue Mar 6: Lehman Brothers Holdings Inc’s. record $639 billion bankruptcy ended on Tuesday, clearing the way for it to start distributing about $65 billion to creditors starting on April 17, court documents show.

Lehman has said that it expects that first group of payments to creditors to be at least $10 billion.

Lehman, now a small fraction of its former size, collapsed on September 15, 2008 with $639 billion in assets, rocking the foundations of the global financial markets and catalyzing the Great Recession.

Exactly 1,268 days later, the legal end to the case enables Lehman to start paying back the creditors, which include Wall Street firms like Goldman Sachs Group Inc and hedge fund investors such as Paulso & Co, which together had asserted more than $300 billion in claims.

But Lehman Brothers will live on for some time as a sliver of its former self, selling assets and continuing to operate in its midtown Manhattan headquarters, where it is down to two floors.

The company, whose assets include $35 billion in cash, is due to make a second payment in September and then will continue to make periodic distributions in the future as it sells off its remaining holdings.

Lehman preparing bid for Archstone stake, according to report

CHICAGO ― The bankruptcy estate of Lehman Brothers Holdings Inc. is preparing to make a $1.33 billion bid for part of apartment owner Archstone that it does not already hold, according to a report in the Wall Street Journal.

The Wall Street Journal, which cited people familiar with the matter, said the bid Lehman was putting together was for a cash deal.

The move was designed to keep real estate mogul Sam Zell from buying a piece of the company, which owns stakes in 77,084 apartments in major cities across the U.S. and Europe.

Lehman, which already owns 47 percent of Archstone, is looking to buy another 26.5 percent in the deal.

Zell’s Equity Residential agreed to buy 26.5 percent, or half the interest Barclays Plc and Bank of America Corp. hold in Archstone for $1.325 billion earlier this month.

But Lehman dismissed the Equity Residential deal as too low, ill-timed and in violation of its agreements with its co-owners.

Lehman Brothers close to naming a new board: report

NEW YORK ― The bankruptcy estate of Lehman Brothers Holdings is close to naming a new board of directors to help finish winding down the collapsed financial firm, the Wall Street Journal said, citing people familiar with the matter.

The new board, made up of seven experts in restructuring, real estate and derivatives who are not tied to Lehman, will oversee the liquidation of tens of billions of dollars in assets for the benefit of Lehman creditors, the people told the WSJ.

A Lehman spokeswoman declined to comment to the Journal. Lehman could not be immediately reached for comment by Reuters outside regular U.S. business hours.

Lehman reported $639 billion of assets when it filed for protection from creditors on Sept. 15, 2008, in the largest U.S. bankruptcy. The filing was a major trigger of that year’s global financial crisis. Lehman was once the fourth-largest U.S. investment bank.

Lehman brokerage trustee eyes $18.3 billion payout

NEW YORK ― The trustee liquidating Lehman Brothers Holdings Inc’s. brokerage unit asked a bankruptcy judge for permission to set aside $18.3 billion of assets to be returned to customers beginning early next year.

That payout would represent more than three-fourths of the $23.7 billion of assets that James Giddens, the trustee for the Lehman Brothers Inc unit, said he has under his control.

Of the $23.7 billion, $12.7 billion are securities and $11 billion is cash. Lehman was the fourth-largest U.S. investment bank prior to its Sept. 15, 2008, bankruptcy, the largest Chapter 11 filing in U.S. history.

“The great bulk of the assets that will be available for distribution … are now in hand,” Giddens said in a late Thursday filing with the U.S. Bankruptcy Court in Manhattan. “The trustee would like to be in a position to proceed with interim distributions to customers in early 2012.”

Soon after Lehman’s bankruptcy, Giddens distributed $92.3 billion to benefit customers holding 110,000 accounts. Many accounts were absorbed by Barclays Plc and asset manager Neuberger Berman.

Giddens is also liquidating the broker-dealer unit of MF Global Holdings Ltd, a futures brokerage once run by former New Jersey governor and Goldman Sachs chief Jon Corzine. Customer distributions in that case are a small fraction of those in Lehman’s bankruptcy.

According to Thursday’s filing, Giddens plans to keep $3.07 billion of assets in reserve pending the outcome of litigation with Barclays. The British bank bought much of Lehman’s investment banking business.

Giddens’ request requires approval by U.S. Bankruptcy Judge James Peck. A hearing is scheduled for Jan. 25, 2012.

Peck is also expected at a Dec. 6 hearing to approve Lehman’s reorganization plan. The plan would return about $65 billion to creditors starting early next year. Lehman this week said that plan has overwhelming creditor support.

Lehman nearer bankruptcy exit; creditors sign on as support grows

NEW YORK ― Lehman Brothers Holdings Inc. is moving closer to emerging from its record bankruptcy, and that its Chapter 11 reorganization is now backed by creditors who hold more than $160 billion of claims.

Lehman said it locked up nine new major settlement agreements, as it works toward what it hopes will be a smooth home stretch for the bankruptcy of what was once Wall Street’s No. 4 investment bank.

These settlements include six with affiliates such as Lehman Brothers International (Europe) and 56 British affiliates, and three with outside creditors such as Deutsche Bundesbank.

“The rapidly growing level of support for our plan demonstrates that our creditors understand the logic of the economic compromise we have proposed,” Lehman Chief Executive Bryan Marsal said on Wednesday.

Creditors have until Nov. 4 to vote on the plan. U.S. Bankruptcy Judge James Peck in Manhattan is expected to consider whether to approve it at a Dec. 6 hearing.

The plan would return about $65 billion to creditors holding $320 billion of claims. Payouts could be under way by early 2012 if Peck approves the plan.

In September, Lehman reached a settlement in principle with Lehman Brothers International (Europe).

Harvey Miller, a bankruptcy lawyer for Lehman, called that dispute the largest remaining obstacle to Lehman’s emergence from bankruptcy.

According to the settlement, made public late Tuesday, the European arm will retain a $1.01 billion unsecured claim against Lehman, and a $900 million unsecured claim against the Lehman Brothers Special Financing derivatives unit, among other claims.

Lehman had $639 billion of assets when it filed for protection from creditors on September 15, 2008, a filing that was a major trigger of that year’s global financial crisis.

The latest Chapter 11 plan was proposed in June, and Lehman has touted it as a compromise for diverse creditor groups.

Two groups — bondholders led by hedge fund Paulson & Co and the California Public Employees’ Retirement System pension fund, and derivatives creditors such as Goldman Sachs Group Inc. and Morgan Stanley — had proposed their own bankruptcy plans before accepting Lehman’s compromise.

Bank of America, Merrill Lynch pledge support for Lehman exit plan

NEW YORK ― Lehman Brothers Holdings Inc. unveiled the latest in a string of settlements with major financial creditors, reaching deals with Bank of America Corp. and Merrill Lynch that will reduce the banks’ claims against Lehman by a combined $7.5 billion.

As part of the settlement, the banks have pledged support for Lehman’s $65 billion bankruptcy exit plan, according to court papers filed late on Wednesday in U.S. Bankruptcy Court in Manhattan.

Bank of America will reduce its derivatives claims against Lehman entities by $4.5 billion, Lehman said. Merrill Lynch, a Bank of America subsidiary since 2008, will lower its claims by an additional $3 billion, court papers show.

Bank of America will also withdraw an appeal of a bankruptcy court’s ruling rejecting its $500 million setoff claim against Lehman, and will return about 71 percent of that total — $356 million — to the Lehman estate, according to the filing.

The deal still requires bankruptcy court approval, and is set for hearing on Oct. 19.

A Lehman spokeswoman did not provide an immediate comment Wednesday night.

Bank of America lauded the “reasonable resolution,” saying in a statement that there are “compelling reasons” the deal should be approved by the court.

The settlement is part of a larger effort by Lehman to resolve complex claims from big banks that were counterparties in various derivatives transactions totaling more than $20 billion.

Lehman in May unveiled a framework for settling those disputes, and so far, eight of 13 banks have agreed to abide by the framework and pledge support for Lehman’s plan, court papers show.

If approved, the pledge of support from Bank of America and Merrill would extend even further the list of creditors that have agreed to get behind Lehman’s $65 billion creditor payback plan.

Touted by Lehman as a compromise that would pay creditors about 20 cents on the dollar, the plan was unveiled in June after earlier proposals met with harsh opposition from creditors.

Two creditor groups holding a combined $100 billion in claims went as far as to propose competing plans in efforts to wrest control of the bankruptcy away from Lehman.

But those groups — bondholders led by hedge fund Paulson & Co, and derivatives creditors which include Goldman Sachs Group Inc. and Morgan Stanley — have each since jumped on board with Lehman’s latest proposal.

Asian affiliates holding about $20 billion in claims have also pledged support, and Lehman announced earlier in September it was close to a similar deal with its European affiliate, Lehman Brothers Inc Europe.

Creditors are set to vote on Lehman’s plan November 4. If approved, it would go before a bankruptcy court for confirmation in December. Lehman could conceivably end its bankruptcy in early 2012.

The company filed the biggest bankruptcy in U.S. history in September 2008, listing $639 billion in assets.

Lehman to seek creditor vote on $65 billion payout plan

NEW YORK ― Lehman Brothers Holdings Inc. will ask a bankruptcy judge on Tuesday to let creditors vote on its $65 billion payout plan, a key step toward ending the biggest bankruptcy in U.S. history.

The investment bank, under Chapter 11 bankruptcy protection since September 2008, will present its plan outline at a hearing in U.S. Bankruptcy Court in Manhattan. If Judge James Peck deems the outline sufficient, creditors will vote on the plan on Nov. 4.

The plan would pay creditors an average of 20 cents on the dollar, with some groups receiving more, including derivatives creditors who would take home nearly 28 cents on the dollar.

Depending on whether creditors accept the plan, final court approval could come as early as December, providing a glimmer of light at the end of Lehman’s three-year bankruptcy tunnel.

But hurdles remain before the company can officially exit bankruptcy and complete its liquidation. Lehman must meet certain financing and other conditions outlined in its plan, a process that could take days, weeks or months, a company spokeswoman said last week. Lehman has said it hopes to begin creditor payouts in the first quarter of 2012.

The process may also be delayed if Lehman has to battle numerous objections from creditor groups unhappy with the plan as crafted. While Lehman has won support from most of its key creditors, some remain opposed, including a German bank association and investment firm Mason Capital Management. They say the plan is too vague on how it would treat creditors of non-bankrupt foreign affiliates.

Lehman has said those objections should be put off until the plan confirmation stage of the bankruptcy.

Lehman has received pledges of support from most of its largest creditors, including two groups that hold a combined $100 billion in claims, nearly one-third of the total claims against Lehman.

Those groups ― a bondholder group led by hedge fund Paulson & Co, and derivatives creditors, including Goldman Sachs Group Inc and Morgan Stanley ― proposed their own plans before accepting Lehman’s revised version.

Asian affiliates holding about $20 billion in claims have also pledged support.

Lehman filed for bankruptcy on Sept. 15, 2008, with $639 billion in assets. The filing was six times larger than any previous U.S. bankruptcy and was considered to be a key catalyst to the financial crisis.

Lehman Brothers creditors pan disclosure proposal from bondholders

NEW YORK ― Creditors of Lehman Brothers Holdings Inc., including units of Bank of America Corp and Barclays PLC, are blasting attempts by Lehman bondholders to force them to reveal details about their claims against the failed bank.

At least 15 parties, including the official creditors’ committee, filed objections Wednesday and Thursday in U.S. Bankruptcy Court in Manhattan, saying the bondholders’ proposal would far exceed bankruptcy rule requirements.

The bondholders, an ad hoc group led by hedge fund Paulson & Co, proposed forcing any party seeking to influence the outcome of Lehman’s bankruptcy to reveal the nature of its claims, including the price paid to acquire those claims.

Such a proposal would burden “virtually any party involved” in the bankruptcy with “unprecedented disclosure obligations,” Barclays Capital Inc said in its objection.

Bank of America dismissed the proposal as a “litigation tactic” in its court filing, saying the move is designed to discourage creditors from seeking a say in Lehman’s repayment process.

Lehman, which filed the biggest bankruptcy in U.S. history in 2008, will divvy up about $60 billion among several classes of creditors. Lehman and two creditor groups, including the bondholders, have filed competing plans putting forth vastly different proposals for who gets what.

Disclosure has become a contentious issue in the case since the judge in the case, James Peck, ordered the bondholders to reveal details about their roughly $20 billion in claims asserted against Lehman. A lawyer for the bondholders said in April that all parties should meet uniform disclosure standards to avoid the appearance of discriminatory enforcement against groups that oppose Lehman’s repayment plan.

An analysis by the Wall Street Journal found that Paulson’s fund, which bought its Lehman debt at a steep discount, could make profits of $350 million to $726 million from the bankruptcy.

A spokesman for the bondholders declined to comment Thursday.