Lehman Brothers Holdings Inc. blocked an Australian unit’s plan to pay creditors, including towns, churches and charities standing to recover as much as A$225 million ($213 million).
The creditors’ vote was delayed indefinitely today after the U.S. company, which bought debt from its Asian unit, gained enough votes to reject the proposal. Lehman said it wouldn’t support the plan as drafted, John Walker, executive director IMF (Australia) Ltd., which funded a lawsuit by the towns and charities, told reporters after the closed-door meeting.
“They’re just asking for more money,” Walker said, referring to the U.S. company which filed the biggest bankruptcy in U.S. history in 2008. Lehman wasn’t “seeking to resolve this on a principled basis,” he said.
Lehman purchased debt owed by the Australian unit to Lehman Brothers Asia on June 14, giving it sufficient power to vote down the plan, Walker said. Rejection of the proposal may delay payouts to creditors by years, Federal Court of Australia Justice Peter Jacobson said at a May 22 hearing when he approved the vote meeting.
The U.S. company is having “an ongoing dialog” with the liquidator, Philip Hoser, a partner at Jones Day LP representing Lehman at the meeting, said in a phone interview. He declined to comment further.
The Australian plan to settle outstanding claims required support from 75 percent of creditors present at the meeting today, voting in each of five creditor classes, as well as a three-quarters majority of the value of each class of creditors present and voting. For each dollar of debt in the local currency, they were to receive between 33 Australian cents and 49.9 cents, according to the proposal.
“Our ratepayers look for those funds,” said Les Finn, a director at the Parkes Shire Council in New South Wales. Money targeted for municipal services, parks and arenas is on hold, he said.
Lehman’s Australian unit was found liable in September by Federal Court Justice Steven Rares for losses incurred by three towns which bought failed securities. The unit, Grange Securities Ltd., “engaged in misleading and deceptive conduct” in investing the towns’ money in synthetic collateralized debt obligations whose value collapsed along with the U.S. housing market, Rares said.
The ruling, which is being appealed by the Australian unit’s liquidator PPB Advisory, extended to a total of 72 councils, churches and charities that Grange advised.
U.S. insurers agreed to pay $45 million and Australian insurers A$3 million to fund the settlement. IMF (Australia) had agreed to drop the class action lawsuit against the unit as part of the settlement.