Court OKs Lehman settlements to free up $15 billion for customers

Tue Apr 16, 2013 2:24pm EDT
 
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By Nick Brown

NEW YORK (Reuters) - A judge on Tuesday approved a set of settlements among Lehman Brothers entities that will allow the company's defunct brokerage to pay back about $15 billion in customer claims.

The intercompany claims had been the final obstacles keeping James Giddens, the trustee recovering money for the broker's customers, from making full payouts to brokerage customers.

While individual retail customers were made whole shortly after Lehman's collapse in 2008, hundreds of affiliate, institutional and hedge fund customers of the brokerage have been waiting for their money.

The settlements, reached last year, were greenlighted by Judge James Peck at a hearing in Bankruptcy Court in Manhattan. This was a "milestone" moment in a "complex" bankruptcy, Giddens said in a statement.

The deals resolve a pair of disputes, one between Lehman's brokerage and its parent entity, the other between the brokerage and the company's European arm. The parent will receive a $2.3 billion customer claim, down from the $19.9 billion it had originally sought, and a $14 billion lower-priority unsecured claims against the brokerage.

The European unit will receive a $9 billion customer claim, down from the $24 billion it initially asserted, and a $4 billion unsecured claim.

The deals free up about $15 billion for Giddens to pay back to customers. He said he expected payouts to begin as soon as the court's orders are final. The settlement with Lehman's European arm still needs approval from a British court, where a hearing is slated for May 1.

Holders of unsecured claims will be partially repaid from whatever is left after customer claims are paid out.   Continued...

 
The Lehman Brothers booth on the trading floor of the New York Stock Exchange, is shown in this September 16, 2008 file photo. REUTERS/Brendan McDermid/Files