Defunct brokerage Lehman Brothers Inc. is on track to pay hedge fund and bank customers in full after 4 3/4 years in liquidation.
New payments starting today will return 100 percent of their money to all brokerage customers, trustee James Giddens said in a statement today. Previously, he said a full payment of more than $15 billion was likely when the brokerage settled its disputes with affiliates.
“Distributions from the LBI estate will stand as the largest return of property in history to former customers of a broker-dealer following a bankruptcy and liquidation proceeding,” he said in today’s statement.
Giddens, who previously faced payment demands by New York hedge fund Elliott Management Corp., is liquidating the remnants of the Lehman brokerage to pay institutional customers after London-based Barclays Plc took over most of the brokerage’s retail clients and some of the trading and banking businesses. He has billed the brokerage estate for about $250 million in fees and expenses for himself and his law firm, according to court filings.
The brokerage went into liquidation after the parent company, Lehman Brothers Holdings Inc., filed the biggest bankruptcy in U.S. history in September 2008, listing assets of $639 billion. The former investment bank, which began paying creditors before the brokerage did, has said it intends to raise a total of about $65 billion to return about 18 cents on the dollar to the average creditor.
General creditors of the brokerage, including former employees, pension funds, institutions, banks, and Lehman affiliates, will be paid next, Giddens said. He didn’t say how much, or when he expects to pay them.
“The process of analyzing, objecting to, settling, and otherwise resolving the more than 12,000 filed general creditor claims is well advanced,” according to the statement.
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).