Lehman Gets $16.3 Billion in Claims on Defunct Brokerage

Lehman Brothers Holdings Inc., the investment bank that has been fighting affiliates over who owes what to whom since filing for bankruptcy in 2008, said its defunct brokerage agreed to let it claim about $16.3 billion.

The accord with the brokerage, Lehman Brothers Inc., and a London-based unit provides the parent company with $2.3 billion in customer claims on the brokerage and $14 billion in unsecured claims, the company said in a statement today.

“The settlement, consistent with the views of the global creditor base, will enable LBHI to accelerate distributions to creditors with allowed claims,” Daniel Ehrmann, Lehman’s head of international operations, said in the statement.

Lehman, which is still liquidating and trying to cut claims after exiting bankruptcy court protection last year, plans a third payment to creditors on April 4. It said in October that its largest claim on an affiliate was $15.2 billion owed by the brokerage.

The pact with the brokerage, which has yet to pay hedge funds and banks, is conditional on its customers getting all their money back, according to the statement.

The Lehman parent has so far paid creditors about 9 cents on the dollar, or half of what it said it expects to pay by about 2016. Lehman said in December that it raised $3.9 billion for creditors in the quarter ended Sept. 30 and another $1.6 billion in October and November, while its $6.5 billion sale of apartment owner Archstone was due to close by March 26.

Disputed Claims

Lehman had cash of $8.3 billion as of June 30, plus restricted cash of $13.6 billion, including money set aside for disputed claims and debts, the New York-based company said in a regulatory filing. It was owed $45.2 billion by affiliates, including the $15.2 billion claimed from the brokerage and $14.3 billion owed by a Swiss affiliate, Lehman Brothers Finance.

Under the latest agreement, and following the outlines of a deal they struck in October, the brokerage agreed to allow affiliate Lehman Brothers International Europe a $7.5 billion customer claim and a $4 billion general estate claim.

The three-party deal requires U.S. and U.K. court approval.

“If judicially approved and implemented, securities customers should receive full satisfaction of their claims and distributions from the general estate will be facilitated,” James Giddens, the brokerage’s trustee, said in the statement.

Lehman failed in September 2008, filing the biggest bankruptcy in U.S. history, because of too much debt and risky real estate investments, according to an examiner’s report.

The main case is In re Lehman Brothers Holdings Inc., 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 lsandler@bloomberg.net

To contact the editor responsible for this story: John Pickering at jpickering@bloomberg.net

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