Creditors agree to Lehman pay plan

LEHMAN Brothers has won support for its latest payout plan from more than 150 creditors holding about $US450 billion in claims, moving it closer to paying some of its debt.

By InvestSMART · 1 Dec 2011

By InvestSMART ·
1 Dec 2011

Comments

LEHMAN Brothers has won support for its latest payout plan from more than 150 creditors holding about $US450 billion in claims, moving it closer to paying some of its debt.

Lehman, which filed the biggest bankruptcy in US history $US613 billion in September 2008, said it could probably get a judge's approval for a $US65 billion liquidation plan this month, with the first distributions early next year.

The company, with creditors ranging from JPMorgan Chase to the New York Giants and individual bondholders, gave its vote count in court filings yesterday after a November 4 voting deadline.

Australian banks and superannuation funds as well as numerous shire councils are among the creditors that filed claims with Lehman's liquidators after it collapsed in 2008.

Among the scores of Australian-based creditors named in court documents are ANZ, National Australia Bank, Commonwealth Bank, Macquarie Bank, MLC Investments, Australian Super, the Health Employees Superannuation Trust, the Insurance Commission of Western Australia, the trustees of the De La Salle Brothers, Gowing Bros Ltd, and Equity Trustees as trustee for the PIMCO Funds.

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 company settled a fight with creditors by allotting more money to a group including Goldman Sachs and less to bondholders such as Paulson & Co.

"Reaching a mutual agreement among these disparate parties was complex and challenging," Lehman chief executive Bryan Marsal said.

The plan was accepted by every class of creditor that voted, Lehman said. In all, 95 per cent of creditors backed the payout scheme and related settlements.

But disputes remain.

Lehman last month subpoenaed Goldman Sachs for documents relating to derivatives claims. Deutsche Bank, after backing Lehman's third payout proposal, said the plan would not succeed unless Lehman upgraded $US2.4 billion in claims held by Deutsche.

Many banks are fighting Lehman over its handling of derivatives contracts, including Deutsche. JPMorgan is battling Lehman over $US6 billion in separate claims.

Go to Google News, then click "Follow" button to add us.

Share this article and show your support

Frequently Asked Questions about this Article…

What is the Lehman Brothers payout plan and who has agreed to it?

Lehman Brothers' latest payout plan is a $US65 billion liquidation proposal aimed at paying some of its debt. More than 150 creditors holding about $US450 billion in claims have backed the plan, and every class of creditor that voted accepted the proposal.

How large was Lehman Brothers' bankruptcy and how much in claims have creditors filed?

Lehman filed the biggest bankruptcy in U.S. history at about $US613 billion in September 2008. The creditors who voted in the latest payout plan represent roughly $US450 billion in claims.

When could creditors expect the first distributions under Lehman’s liquidation plan?

Lehman said it could probably obtain a judge’s approval for the $US65 billion liquidation plan this month, with the first distributions to creditors expected early next year.

Which Australian banks and superannuation funds are named as Lehman creditors?

Australian-based creditors named in court documents include ANZ, National Australia Bank (NAB), Commonwealth Bank, Macquarie Bank, MLC Investments, AustralianSuper, the Health Employees Superannuation Trust, the Insurance Commission of Western Australia, trustees for the De La Salle Brothers, Gowing Bros Ltd, and Equity Trustees as trustee for PIMCO funds, as well as numerous shire councils.

How much creditor support did the payout scheme receive?

Lehman reported that 95% of creditors backed the payout scheme and related settlements, and that the plan was accepted by every class of creditor that voted.

Are there ongoing disputes or legal challenges related to the Lehman payout plan?

Yes. Disputes remain, including Lehman subpoenaing Goldman Sachs for documents related to derivatives claims. Deutsche Bank has said the plan won't succeed unless Lehman upgrades $US2.4 billion in claims it holds, and JPMorgan is contesting about $US6 billion in separate claims.

How did Lehman resolve competing claims among different creditor groups?

Lehman settled fights among creditors by reallocating money—giving more to a group that included Goldman Sachs and allocating less to certain bondholders such as Paulson & Co. Lehman CEO Bryan Marsal described reaching a mutual agreement among the disparate parties as complex and challenging.

What should everyday investors know about the progress of Lehman Brothers' liquidation?

The liquidation plan move brings Lehman closer to paying some of its debts, with possible judge approval imminent and first distributions planned for early next year. However, significant disputes over derivatives and claim amounts remain and could affect timing or recovery amounts for creditors, including banks, super funds and bondholders.