Lehman Brokerage Settles With European Affiliate

Lehman Brothers Inc. and its European affiliate resolved lawsuits over more than $38 billion in bankruptcy claims, a ``critical milestone'' in the distribution of assets to customers and creditors, the negotiators said.

The tentative agreement requires documentation and approval by a U.S. bankruptcy judge and the English High Court, according to a statement today from James Giddens, the trustee liquidating the U.S. brokerage, and Tony Lomas, joint administrator of Lehman Brothers International (Europe).

“The agreement sets the stage for distributions that will provide for 100 percent recovery of customer property,” Giddens said. It “will allow for customer and creditor distributions much sooner than if LBIE’s claims involving hundreds of thousands of transactions were litigated.”

Lehman has faced demands from institutional creditors including Elliott Management Corp. to make distributions to hedge funds and banks after four years in liquidation. Giddens had $25.4 billion in securities in hand as of March 30, Elliott said in court papers.

The European affiliate said last year its clients were owed $8.3 billion by the brokerage. LBIE’s claims were “the largest unresolved contingency” in the brokerage liquidation, Giddens has said.

Lehman Brothers Holdings Inc., the brokerage’s parent company, filed the biggest bankruptcy in U.S. history in September 2008. The New York-based company exited court protection in March.

The parent company made its first payment of $22.5 billion to creditors in April and a second payment of $10.2 billion on Oct. 1. A third distribution is set for around March 30.

To contact the reporter on this story: Phil Milford in Wilmington, Delaware at pmilford@bloomberg.net

To contact the editor responsible for this story: Michael Hytha at mhytha@bloomberg.net