Lehman Brothers Holdings Inc., which is still liquidating after exiting court protection last year, paid advisers and managers $153.8 million in December, putting total fees over the $2 billion mark in the more than four years since it filed for bankruptcy.
December’s outlays included $84 million in incentives for a plan that will pay creditors an average of 18 cents on the dollar, according to today’s filing in U.S. Bankruptcy Court in Manhattan. Restructuring firm Alvarez & Marsal LLC, which runs the defunct investment bank, has made almost $583 million so far, including incentive payments. Lead bankruptcy law firm Weil, Gotshal & Manges LLP has earned $454 million.
Lehman creditors will receive a third payment in the period from March 25 to April 30, according to a separate filing. U.S. Bankruptcy Judge James Peck, in a signed order, today approved Lehman’s request for a flexible schedule to pay creditors. The defunct firm has so far paid creditors about 9 cents on the dollar, or half of the amount it expects to pay by about 2016.
Lehman became the most expensive bankruptcy in U.S. history in April 2010, when it topped the record $757 million tab for energy trader Enron Corp.’s three-year liquidation, according to the database of Lynn LoPucki, a bankruptcy-law professor at the University of California, Los Angeles. Fees surpassed $1 billion after 24 1/2 months in bankruptcy in October 2010.
Enron’s payback to general unsecured creditors was about 53 percent, albeit with a long wait after it came out of bankruptcy court in 2004.
The high fees result from competition among bankruptcy courts for big cases, LoPucki, author of “Courting Failure: How Competition for Big Cases Is Corrupting the Bankruptcy Courts” (University of Michigan Press, 2005), said at the time. Judges don’t often challenge payments to lawyers who bring in big cases, because under current laws those lawyers are free to take future cases to competing courts that won’t question the fees, he said.
For post-bankruptcy work, Lehman last month paid $34.8 million in fees, including $5.3 million for Alvarez & Marsal and $3.8 million for Gleacher & Co. Fees through the March 6 exit from bankruptcy court reached about $1.9 billion, while fees paid since March 7 totaled $160.8 million.
Lehman, once the world’s fourth-biggest investment bank, filed the biggest bankruptcy in U.S. history in September 2008 with assets of $639 billion. Creditors included Goldman Sachs Group Inc., UBS AG, the New York Giants professional football team and Abu Dhabi Investment Authority.
The case is In re Lehman Brothers Holdings Inc., 08-13555, U.S. Bankruptcy Court, Southern District of New York (Manhattan).