Lehman Brothers Holdings Inc., the defunct investment bank, has $8.2 billion of cash available for creditor payments after raising $4.7 billion in the second quarter from real estate sales, derivatives and settlement of a lawsuit.
Overseen by a new board since its emergence from bankruptcy in March, Lehman plans semi-annual distributions, including a second payment to creditors in September, and is “focused” on maximizing cash for that purpose, it said in a regulatory filing yesterday. Allowed claims for payment have been cut to $303 billion from $1.3 trillion originally, with another $58 billion that may be deemed valid, out of disputed claims of $193 billion, Lehman said.
Lehman has said it aims to raise $53 billion through 2016 or so, to pay an average of 18 cents on the dollar on final claims of $300 billion. The company filed the biggest bankruptcy in U.S. history in September 2008, listing debt of $613 billion. It made its first payment of $22.5 billion to creditors last April, about 3 ½ years after its collapse.
“The company continues to pursue the objective of value maximization and prompt cash distributions to creditors through the execution of an orderly wind down process and the judicious and timely resolution of claims,” Lehman said in the filing.
Targets for Cuts
Among creditors targeted for cuts through litigation are JPMorgan Chase & Co. and Citigroup Inc., Lehman said. It has reached an agreement in principle with its former brokerage, Lehman Brothers Inc., that would resolve disputes over mutual claims, it said.
Lehman and its affiliates had $21.9 billion in cash and investments on June 30, with $13.7 billion of it reserved for disputed claims, taxes, and other obligations, including a $2 billion deposit with Citigroup. A $504 million reserve for the company’s thrifts, may be freed up soon, Lehman said.
The company said last week its cash flow may reach $40.5 billion through 2015 and beyond, or $6 billion more than previously anticipated. The number excludes estimates from litigation and other potential inflows, while including the $22.5 billion already paid to creditors.
Lehman paid advisers $16.4 million in June, bringing total fees to more than $1.7 billion since it failed. Its chief bankruptcy law firm, Weil Gotshal & Manges LLP, made $6 million in June, bringing total fees from Lehman work to $419 million.
Lehman, 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 proposed rival plans to pay Lehman’s debt.
Lehman failed because of too much debt and risky real estate investments, according to a bankruptcy examiner’s report.
The bankruptcy case is In re Lehman Brothers Holdings Inc., 08-13555, U.S. Bankruptcy Court, Southern District of New York (Manhattan).