Paulson-Calpers File Lehman Plan to Boost Bond Payout

Paulson & Co. and other Lehman Brothers Holdings Inc. senior bondholders filed a new liquidation plan for the defunct firm that would pay 25.4 cents on the dollar to all holders of the bonds, an increase from 24.5 cents under a plan filed in December.

The group, which includes the California Public Employees’ Retirement System, is fighting to control Lehman’s $61 billion liquidation with a payout plan that competes with Lehman’s own proposal and a third by a group including Goldman Sachs Group Inc. (GS) and Morgan Stanley.

The fight to wring profit from the biggest bankruptcy in U.S. history goes to court on June 28, when at least two of the rival plans, Lehman’s and Paulson-Calpers’s, are due to be presented to U.S. Bankruptcy Judge James Peck in Manhattan. Depending on the outcome, the Paulson-Calpers group said it’s willing to launch a lawsuit to battle for its proposal.

The other two plans “are unconfirmable, provide inferior recoveries and are subject to numerous legal and equitable defects,” the group said in yesterday’s filing. It might use “a separate contested matter or adversary proceeding” if its plan doesn’t prevail, it said.

Kimberly Macleod, a Lehman spokeswoman, said the company was reviewing the group’s plan. Lehman has said it aims to confirm a liquidation proposal by November.

Cents on Dollar

Senior bondholders are being offered 21.4 cents on the dollar in Lehman’s plan, and 16 cents in the Goldman Sachs- Morgan Stanley (MS) proposal, which would pay derivatives creditors as much as 40 cents. The Paulson-Calpers plan would pay Goldman Sachs 27.2 cents for derivatives claims against its special financing unit, while Lehman would pay 34.3 cents, according to the filing.

Hedge fund Paulson paid as little as 9 cents on the dollar for some of its bonds, while Calpers spent more than $1 for part of its bondholding, according to a court filing. The group holds about $16 billion in senior bonds, out of more than $80 billion outstanding, according to Lehman.

Lehman and its affiliates today reported total assets of $250.7 billion against liabilities of $310.8 billion. The figures, as of Dec. 31, come from an unaudited balance sheet in a regulatory filing. Real estate assets were valued at $5.6 billion, mostly commercial properties.

Asset Value

Cash held by Lehman and its affiliates was $23.2 billion on March 31. Lehman Chief Executive Officer Bryan Marsal has said that he aims to raise a total of $61 billion to pay claims of $322 billion. The Paulson-Calpers plan was amended partly to reflect that valuation of Lehman’s assets, according to yesterday’s court filing.

Bankrupt Lehman has spent more than $1.2 billion on managers and advisers during its bankruptcy, including $31.9 million in March, according to a regulatory filing today.

The restructuring firm Marsal co-founded, Alvarez & Marsal LLC, made $422.9 million in “interim management” fees for 30 1/2 months of work, including $10.2 million last month, according to a filing with the U.S. Securities and Exchange Commission.

The case is In re Lehman Brothers Holdings Inc. (LEHMQ), 08-13555, U.S. Bankruptcy Court, Southern District of New York (Manhattan).

To contact the reporter on this story: Linda Sandler in New York at

To contact the editor responsible for this story: John Pickering at

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