Lehman Brothers Financial SA (LEHNQ)

[DJN]

News for 'LEHMQ' - (DJ Lehman Strikes Deal With Large Creditor Group To Reduce Claim)

By Joseph Checkler

Of DOW JONES DAILY BANKRUPTCY REVIEW

Lehman Brothers Holdings Inc. (LEHMQ) said creditors represented by Wilmington Trust Co. have agreed to reduce their claim against Lehman to $48.7 billion from an amount that could have exceeded $73 billion.

In a Friday filing with the U.S. Bankruptcy Court in Manhattan, Lehman said the reduction in the claim amount has a lot to do with Lehman's repayment toward and repurchasing of the bonds held by creditors represented by Wilmington Trust. The settlement also reflects the two sides cleaning up duplicate claims that were filed by both Wilmington Trust and the creditors it represents and a compromise on how complex structured-securities claims would be handled. A hearing date of Nov. 30 has been set for a court to approve the settlement.

The move is Lehman's latest to sort out claims as it prepares for an early December hearing at which a court will decide whether to approve its creditor-payback proposal. Last week, Lehman announced a deal with Bank of America Corp. (BAC) and Merrill Lynch to reduce by more than $4 billion their derivatives claims against the liquidating investment bank, the latest of Lehman's major derivatives counterparties to accept a compromise.

Lehman's newest creditor-payback proposal, filed in late June, could pay creditors as much as $65 billion and gives those owed money from Lehman's subsidiaries larger recoveries than they would have received under its original plan, but it defines how much they can claim. Creditors of Lehman's parent company would receive much less.

For instance, a majority of the creditors represented by Wilmington Trust--senior noteholders of the Lehman parent company--are set to receive 21.1 cents on the dollar. Creditors of Lehman's Specialty Finance Unit, on the other hand, will receive more than 30 cents on the dollar. The only creditors expected to receive 100% recovery are individual customers of Lehman's brokerage, which was sold to Barclays PLC (BARC.LN, BCS) in September 2008, when Lehman filed for bankruptcy.

Despite the differences in returns expected, Lehman's plan has much wider support than a prior one, including from two groups that had filed competing proposals. Judge James Peck of U.S. Bankruptcy Court in Manhattan sent the plan to creditors for a vote last month and has set a Dec. 6 hearing to consider whether to confirm it.

Since the investment bank's collapse in September 2008, a team of hundreds of bankruptcy professionals under the direction of Alvarez & Marsal Inc. has managed Lehman's assets--which include real-estate holdings, corporate debt and derivatives--for the benefit of creditors.

Lehman's most-recent estimates say it would likely have $322 billion in allowed claims against the estate, with $272 billion from the parent company and about $50 billion from its subsidiaries.

(Dow Jones Daily Bankruptcy Review covers news about distressed companies and those under bankruptcy protection.)

-By Joseph Checkler; Dow Jones Newswires; 212-416-2152;

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(END) Dow Jones Newswires

October 03, 2011 12:19 ET (16:19 GMT)

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