Lehman Brothers Holdings Inc., which filed the biggest bankruptcy in U.S. history in 2008, said it was exiting court protection and will make its first payment to creditors on April 17.
The defunct investment bank has about $18 billion of cash available, and has said its first distribution will exceed $10 billion. In theory, it could give creditors $12 billion to $14.7 billion initially, depending on how much cash it needs to keep in reserve for disputed claims, it told a judge in U.S. Bankruptcy Court in Manhattan in a filing on Feb. 15. Today’s statement from Lehman didn’t specify the size of the distribution.
Lehman, which was run by Chief Executive Officer Richard Fuld when its collapse helped bring on the worst economic slump since the Great Depression, settled a fight with creditors in a payment plan that allotted more money to derivatives claimants including Goldman Sachs Group Inc. and less to bondholders such as Paulson & Co. Both groups had proposed rival plans to pay Lehman’s debts.
The former investment bank’s official exit from bankruptcy court after getting a liquidation plan approved doesn’t mean it is shutting up shop. Chief Executive Officer Bryan Marsal has said asset sales will continue through 2014 as he aims to raise a total of $65 billion to pay estimated claims of $370 billion.
Lehman still is fighting creditors over billions of dollars in claims, including $6 billion filed by JPMorgan Chase & Co. that the defunct firm says are inflated. Its lawsuits continue, too. Today in bankruptcy court, Lehman filed a revised lawsuit against Bank of America Corp. and Barclays Plc to stop them from selling their remaining stake in Archstone, Lehman’s biggest real-estate asset.
Investors in failed energy trader Enron Corp. were paid 53 cents on the dollar, while Lehman’s liquidation plan would give the average creditor less than 18 cents on the dollar in the next few years, according to court documents.
Lehman’s senior bondholders, including Paulson, would recover about 21 cents on the dollar under the Marsal plan. Claims on Lehman’s derivatives unit, such as Goldman’s, would be paid about 28 cents to 32 cents, while commercial paper claims would get 48 cents to 56 cents, all based on each dollar of their investment, court papers show.
Lehman failed because of too much debt and risky real estate investments, according to a bankruptcy examiner’s report. The firm filed for bankruptcy with $613 billion in debt. Bankruptcy managers and advisers have charged Lehman almost $1.6 billion in fees since it foundered.
The bankruptcy case is In re Lehman Brothers Holdings Inc., 08-13555, U.S. Bankruptcy Court, Southern District of New York (Manhattan).