Lehman Creditors Demand Details on Payout Plan as Vote Nears
Lehman Brothers Holdings Inc. creditors are demanding the failed investment bank disclose more details about its plan to liquidate and pay claims before the proposal moves forward.
Lehman hasn’t provided the information creditors need to evaluate the plan and decide whether to support it, several of them said in court filings today in U.S. Bankruptcy Court in New York, including Sumitomo Mitsui Banking Corp. and the German central bank.
Lehman “fails to apprise creditors of the substantial risks underlying the debtors’ plan and arm creditors with information necessary to assess those risks,” said the national association of German private-sector banks.
The objections come as Lehman, which filed for bankruptcy almost three years ago, is moving forward with a plan to pay creditors with claims that Chief Executive Bryan Marsal has estimated will total about $322 billion. Lehman is scheduled to ask a judge on Aug. 30 to approve a description of the proposal for creditors, who would then vote on the plan.
Kimberly Macleod, a Lehman spokeswoman, declined to comment on the objections. Others who said Lehman’s disclosures fall short included LibertyView Capital Management, Wilmington Trust Co., and the arm of the Justice Department that monitors bankruptcy proceedings.
Risks for Creditors
Those objecting said Lehman should provide more information about risks for creditors, recoveries under different scenarios, and a central compromise that would allocate distributions among some creditor groups. Deutsche Bundesbank, German’s central bank, called a liquidation analysis by Lehman “materially misleading and incomplete.”
Lehman is pitching its plan after striking a deal with creditors, including Goldman Sachs Group Inc. (GS) and hedge fund Paulson & Co. Before the agreement, two groups of creditors were fighting Lehman and pushing rival liquidation plans. Lehman has said that creditors holding more than $100 billion in claims now back its proposal. The competing plans will be held “in abeyance” while Lehman’s proposal moves ahead, Lehman said.
Goldman Sachs, Och-Ziff Capital Management Group LLC (OZM), UBS AG (UBSN), a bondholder group, and others filed papers today asking that Lehman’s plan description, known as a disclosure statement, be approved.
Lehman, once the fourth largest investment bank in the U.S., filed for bankruptcy in September 2008 with assets of $639 billion. It hopes to go to court by the end of the year for approval of the plan, Macleod said.
The case is In re Lehman Brothers Holdings Inc., 08-13555, U.S. Bankruptcy Court, Southern District of New York (Manhattan).