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Lehman Set to Pay $17.9 Billion to Creditors Next Month

Lehman Brothers Holdings Inc.’s creditors are set to receive about $17.9 billion next month in the fifth such distribution since the company filed the biggest U.S. bankruptcy at the peak of the financial crisis.

The payout scheduled for April 3 will include about $11.7 billion on third-party claims and $1.1 billion for recently allowed claims that would have been paid by earlier distributions, lawyers for the defunct investment bank said today in a filing in U.S. Bankruptcy Court in New York. A sixth payout is expected around Sept. 30, Lehman said.

Lehman’s estate has already paid out more than $56 billion to third-party creditors -- a figure that’s expected to reach at least $80.6 billion before the case is resolved, court records show. That estimate, made public in July, is an increase over the $65-billion recovery projected in the company’s liquidation plan approved in December 2011.

The $15.6 billion increase is due mostly to new estimated recoveries from Lehman’s former brokerage unit, Lehman Brothers Inc., and expectations of increased receipts from derivatives, loans and private equity investments, according to Lehman’s cash-flow estimates filed in court last year.

Fees, Expenses

Harvey Miller, Lehman’s bankruptcy lawyer, estimated in September that recoveries may rise to as much as 22 cents as the value of Lehman’s assets increases. When the bankruptcy plan was approved in 2011, the figure was 18 cents.

Lehman filed a Chapter 11 petition on Sept. 15, 2008, listing $613 billion in debt, after the New York-based bank failed to win U.S. government aid or attract a buyer. Since then, the Lehman estate has paid more than $2 billion in fees and expenses to professionals working on the case, including Miller.

Miller’s team has been adding value to the estate through litigation and settlements. In February, Lehman reached an accord with the founder of software maker SAP AG, a step that freed up about $1.8 billion for creditors. That dispute involved the proper way to calculate damages caused by the termination of contracts.

Also in February, the defunct bank reached a settlement to pay $767 million to Freddie Mac to satisfy a $1.2 billion bankruptcy claim, one of the biggest remaining in the case. The deal with the government-controlled mortgage-finance company will make hundreds of millions of dollars available for “prompt distribution” to creditors after being held in reserve, the bank said in a court filing.

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

To contact the reporter on this story: Erik Larson in New York at elarson4@bloomberg.net

To contact the editors responsible for this story: Andrew Dunn at adunn8@bloomberg.net Stephen Farr, Charles Carter

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