Lehman Brothers Financial SA (LEHNQ)

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💲👁️

🆘🆘 $40 billion more than the Debtors had estimated (subject to various
disclosures and assumptions) prior to Plan confirmation;
If no CTs' payment, blame AI:
Based on the Lehman Brothers Holdings Inc. (LBHI) bankruptcy plan, the relevant terms for debenture holders of trust preferred securities include their subordinated status, classification under the plan, eventual distributions, the settlement of related claims, and the liquidation of the trusts.
Subordinated creditor status
Lower priority: Debentures issued to the trusts by LBHI were a form of subordinated debt. As subordinated creditors, holders rank lower in priority than senior secured and unsecured creditors for repayment. In bankruptcy, this means subordinated debenture holders are paid only after all higher-ranking claims are fully satisfied.
Initial recovery expectations: Initial expectations for recovery rates for subordinated debtholders were low. However, improved asset prices and favorable court rulings during the bankruptcy process🎯 led to better-than-expected recovery rates over the course of the liquidation.
Classification and treatment under the Chapter 11 plan
Plan confirmation: The Modified Third Amended Joint Chapter 11 Plan for LBHI was confirmed by the Bankruptcy Court on December 6, 2011, and became effective on March 6, 2012.
Claim classes: Claims based on LBHI's subordinated debt were categorized into specific classes, such as Classes 10A, 10B, and 10C, under the confirmed plan.
Distributions to debenture holders
Ongoing payments: Distributions to holders of allowed claims began in April 2012 and have continued semi-annually as the liquidation of assets progressed.
Trustee filed claims: The indenture trustees for each trust filed timely proofs of claim on behalf of the trusts and the beneficial owners, representing the debenture holders.
Cash distributions: Holders receive cash distributions based on their pro-rata share of the recovered assets, allocated according to their claim class. The final recovery percentage for unsecured creditors ended up significantly higher than initial estimates.
Voluntary final distribution: In 2021, the court approved a voluntary final distribution for certain creditors with lower-value claims. They had the option to take a smaller final payment to exit the process, or stay in to receive distributions over time.
Resolution and settlement of claims
Large-scale settlements: The bankruptcy process involved several large-scale settlements, which directly impacted the funds available for distributions. One significant settlement involved JPMorgan Chase (JPMCB), which was involved in litigation with LBHI over billions of dollars in collateral.
Litigation outcome: The resolution of litigation with JPMCB and others increased the total funds available for distribution to creditors, 🎯including debenture holders.
JPMCB's role as trustee
Property trustee: JPMCB served as a property trustee for the trusts that issued the preferred securities, as mentioned in your query. Its duties involved managing the assets of the trust (which were the LBHI debentures).
No guarantee: JPMCB was not the guarantor of the debentures. When the underlying issuer, LBHI, filed for bankruptcy, the debenture's value was subject to the bankruptcy process, not protected by JPMCB.