Lehman creditors win $48m payout
Australian clients of Lehman Brothers may start to receive payouts in April after liquidators struck a deal with the failed investment bank's insurers.
Liquidator Marcus Ayres, of PPB, said a $48 million settlement with Lehman Brothers' insurers "releases the shackles" stopping him reaching a commercial settlement.
Lehman Brothers, which collapsed in 2008, owes up to $490 million to Australian clients, including councils, charities and churches that sued the company after being sold highly complex debt securities.
The securities, known as collateralised debt obligations or CDOs, had AAA credit ratings but plunged in value in the global financial crisis.
A settlement with the class action litigants was derailed by the US arm of Lehman Brothers in June after it bought debt belonging to the Asian part of the complex group.
However, the deal with the insurers effectively bypasses the US arm, enabling Mr Ayres and his co-liquidator Steve Parbery to go ahead with the settlement.
"We can now start to get things rolling again," Mr Ayres said.
"If the US tries to kibosh the deal, the only way they can do that is go through the courts. They can't exert any more commercial pressure on anybody."
The deal was legally sound and "a good commercial settlement", he said. About $311 million will be available to Australian creditors.
Amanda Banton, a partner at Piper Alderman, which ran the class action, welcomed the deal. "That's pretty good because the churches and charities have been waiting a long time and now there's finally some light at the end of the tunnel," she said.
"The liquidator is envisaging dividends of between 44.3¢ and 53.8¢ [in the dollar] for clients sold the toxic CDOs."
That compared with the original deal offered under a deed of company arrangement "where clients some were looking at as low as 2¢".
"It's a significantly better outcome than under the first DOCA that we had to go all the way to the High Court to set aside," she said.
Mr Ayres said the deal required approval of the Federal Court.
"Whatever we strike with the class action, if we are capable of striking a deal, that will be mirrored with the other creditors so everyone is treated the same," he said.
Mr Ayres hoped creditors would be able to file claims over the Christmas-New Year break so that he would be able to "start paying money out at the end of April".