Lehman Trustee Seeks Another Payout
April 28 2016 - 05:50PM
Dow Jones News
The trustee in charge of Lehman Brothers Inc. on Thursday sought
court approval to make his fourth distribution to the defunct
brokerage's unsecured creditors, boosting their recovery to 38
cents on the dollar.
Trustee James Giddens said he's close to finishing winding down
Lehman's broker-dealer business more than seven years after the
bank collapsed.
Previously, creditors' recovery was pegged at 35 cents on the
dollar.
"With the potential for a fourth distribution, the amount
returned to general creditors continues to exceed all expectations,
and there will be more to come," Mr. Giddens said. "We are pressing
to resolve all outstanding issues fairly and equitably so we can
close out the estate."
Mr. Giddens, who already has returned $7.8 billion to the
brokerage's creditors, says he hasn't calculated the exact amount
he expects to pay out. With $1.47 billion in the estate's coffers,
he estimates it will another 3 cents, bringing the recovery rate to
38 cents on the dollar.
The trustee said he intends to ask Judge Shelley C. Chapman of
U.S. Bankruptcy Court in New York next month for approval for the
fourth payout. If he gets the green light, checks will be mailed
out in July. Further payouts would be contingent on winning or
settling pending litigation, Mr. Giddens said, which would free up
funds currently on reserve.
Mr. Giddens began paying back Lehman's creditors—former
employees, pension funds, banks and investment firms with unsecured
claims against the brokerage—after paying back the brokerage's
customers in full.
The distinction between "customer" and "unsecured creditor" is a
crucial one in the Lehman case. Customer claims get paid before
creditor claims under the law covering failed broker-dealers, the
Securities Investor Protection Act of 1970.
Customers got 100% of their money back, as have those holding
secured and priority claims. Unsecured creditors are set get much
less, albeit more than originally expected.
As Mr. Giddens has resolved and settled more claims, he has
asked Judge Chapman to further approve distributions to the
creditors.
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 distributed $106 billion
to more than 111,000 Lehman customers plus another $8 billion to
creditors.
Lehman, once the nation's fourth-largest investment bank by
assets, collapsed into the largest bankruptcy ever in September
2008 with $613 billion in liabilities.
The filing sent markets into turmoil and helped trigger a global
financial crisis. Lehman's brokerage business was quickly sold to
Barclays PLC, and the company's New York-based holding company,
Lehman Brothers Holdings Inc., officially exited chapter 11
bankruptcy protection in 2012.
The estate of Lehman Brothers's holding company, which itself
has paid back around $100 billion to creditors, is still winding
down and selling its remaining holdings, a process that is expected
to continue for several more years. Judge Chapman is overseeing
both proceedings.
Write to Patrick Fitzgerald at patrick.fitzgerald@wsj.com
(END) Dow Jones Newswires
April 28, 2016 17:35 ET (21:35 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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