Lehman Judge's Decision Means More Cash For Creditors Soon
February 22 2012 - 11:53AM
Dow Jones News
A judge on Wednesday said Lehman Brothers Holdings Inc. (LEHMQ)
can set aside non-cash assets for disputed claims so it has more
cash to pay back other creditors soon, a decision that will give
the failed investment bank more money to pay in its initial
distribution tentatively set for about the end of the first
quarter.
Judge James Peck of the U.S. Bankruptcy Court in Manhattan
approved the request, which sets the stage for Lehman to distribute
more than $10.5 billion to creditors when it makes its first
distribution to them. Without the judge's approval, Lehman would
have had $8.1 billion for the initial distribution to those
creditors.
Peck said reserving the non-cash assets does the job of
"balancing the needs" of creditors with claims that are allowed and
those with claims still in dispute.
The approval allows Lehman to stash away the non-cash assets it
can later use to pay currently unresolved claims. Lehman said the
risk that the money won't be available later is miniscule. Peck's
decision means Lehman has more immediate cash available to begin
paying back its unsecured creditors whose claims are already
known.
The judge approved setting aside until a later date one
objection from Jamie Murcia, an individual creditor with a claim of
about $1.4 million. Peck expressed displeasure that the Murcia
objection hasn't been resolved and hinted that he would have
overruled it if it were heard Wednesday.
Milbank Tweed Hadley & McCoy LLP's Evan R. Fleck, a lawyer
for Lehman's official committee of unsecured creditors, said in
court Wednesday that "this really does make sense and protects the
interest of all parties."
Peck on Wednesday also approved Lehman's request to slash by $35
billion claims from big banks related to residential
mortgage-backed securities. Those banks, including Citigroup Inc.
(C) and Wells Fargo & Co. (WFC), had originally filed claims
worth more than $37 billion, but Peck's approval means only $2.4
billion will be put aside to eventually satisfy them.
Lehman collapsed into the largest bankruptcy in history in
September 2008, and since then, a team of bankruptcy professionals
under the direction of Alvarez & Marsal Inc. has managed its
assets, including real-estate holdings, corporate debt and
derivatives.
Late last year, Peck approved Lehman's creditor-payback plan,
which should distribute about $65 billion and treats creditors of
Lehman subsidiaries better than those of the parent company.
Despite confirmation of the plan, the company still has billions
of dollars in real estate and other assets and will continue to
exist as it unloads and manages those investments.
While Lehman's plan has been confirmed by Peck, it still isn't
considered "effective," so the distributions can't yet begin.
(Dow Jones Daily Bankruptcy Review covers news about distressed
companies and those under bankruptcy protection.)
-By Joseph Checkler, Dow Jones Newswires; 212-416-2152;
joseph.checkler@dowjones.com
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