I like the payment being made Sept 10 to record holders of July 15 better
Nearly six years after Lehman Brothers Holdings Inc. collapsed into bankruptcy, unsecured creditors of the investment bank's brokerage are finally getting paid.
The trustee unwinding the brokerage, Lehman Brothers Inc., said on Friday that the former employees, pension funds, banks and investment firms with unsecured claims against the brokerage will get an initial payout of $4.6 billion as soon as next month. That payment represents a recovery of about 17% of total unsecured claims against the brokerage.
"That such a distribution is even possible represents an extraordinary achievement that was far from certain when the liquidation began," the brokerage trustee, James W. Giddens, said in a news release Friday.
James Giddens, trustee of Lehman Brothers Inc. Bloomberg News
The creditors had to wait for years as Mr. Giddens repaid the brokerage's customers, who received 100% of their money back. The Lehman parent company and its units, which are being unwound in a separate bankruptcy proceeding, have already paid a total of $57.1 billion to unsecured creditors excluding Lehman units, some of which were also creditors. Most creditors of the parent company and its units are expected to recover between 25 and 35 cents on the dollar.
Mr. Giddens said he expects to make the first payment of $4.6 billion to the brokerage's unsecured creditors on Sept. 10. He said additional payments are likely in the future but didn't say how much or give a timetable for later distributions. All told, $20.4 billion in claims have been allowed against the brokerage and another $6.8 billion in claims are still unresolved.
Customer claims get paid before creditors under the law covering failed broker-dealers, the 1970 Securities Investor Protection Act.
Individual customers of the U.S. brokerage, which is under the purview of the bankruptcy court but not technically in bankruptcy protection, received about $92.3 billion almost immediately after Lehman collapsed. In all, Mr. Giddens has paid more than $105 billion to customers and hopes to have returned more than $110 billion when he is finished.
Judge Shelley C. Chapman of U.S. Bankruptcy Court in Manhattan last month approved the creation of a fund to pay back the brokerage's unsecured creditors, which Mr. Giddens had said would be $3 billion or more.
"The fact that customer claims have been fully satisfied, and that unsecured general creditors are now receiving a significant distribution, is an extraordinary achievement," Securities Investor Protection Corp. President Stephen Harbeck said in a news release Friday.
Lehman, once the nation's fourth-largest investment bank by assets under management, collapsed into the largest bankruptcy ever in September 2008 with $613 billion in liabilities.
