Defunct brokerage Lehman Brothers Inc. is set to pay more than $15 billion to hedge fund and bank customers after 4 1/2 years in liquidation.
Brokerage trustee James Giddens, who previously faced payment demands by New York hedge fund Elliott Management Corp., won a bankruptcy judge’s approval today to put the money into a fund to pay customers, according to a court order. The trustee has said the approval would “set the stage” for payments that will give customers all their money back.
Assets not needed for customers will go to the general estate of the brokerage to pay its other creditors, with the exception of reserves that Giddens is required to maintain, the judge said. He increased the money to be aside for Giddens’ court battle with Barclays Plc, which bought parent company Lehman Brothers Holdings Inc.’s North American businesses in 2008, to almost $5.5 billion, from $4.6 billion.
Giddens is liquidating the remnants of the Lehman brokerage to pay institutional customers after London-based Barclays took over most of the brokerage’s retail clients and some of the trading businesses. He has billed the brokerage estate for almost $238 million in fees and expenses for himself and his law firm, according to court filings.
The brokerage went into liquidation after the Lehman parent filed the biggest bankruptcy in U.S. history in September 2008, listing assets of $639 billion. The former investment bank has paid creditors $36.7 billion, out of the estimated $65 billion it has said it will distribute by around 2016.
The Lehman brokerage liquidation is Securities Investor Protection Corp. v. Lehman Brothers Inc., 08-01420, U.S. Bankruptcy Court, Southern District of New York (Manhattan). The parent’s bankruptcy case is In re Lehman Brothers Holdings Inc., 08-13555, U.S. Bankruptcy Court, Southern District of New York (Manhattan).