Lehman trustee hopes to pay customers in full
Tue Aug 9, 2011 1:39pm EDT
* Aims to make certain interim payouts by April 2012
* Says general creditors face "inevitable" shortfall
* Prepares for 2013 trial against European affiliate
By Nick Brown
NEW YORK, Aug 9 (Reuters) - The trustee winding down Lehman
Brothers Holdings Inc's (LEHMQ.PK) brokerage hopes to repay
customers in full, but expects a significant shortfall in
paying back $47.5 billion owed to general creditors.
The bulk of brokerage Lehman Brothers Inc's $20.6 billion
in assets will probably go to customers, James Kobak, a lawyer
for trustee James Giddens, said on Tuesday.
Customers have asserted $12 billion in allowed claims and
another $43 billion in unresolved claims, Kobak said at the
trustee's "State of the Estate" address in U.S. Bankruptcy
Court in Manhattan. Giddens has said he believes the bulk of
the unresolved amount will be found invalid.
The unresolved customer claims are largely from Lehman
affiliates, including $17 billion from broker-dealer Lehman
Brothers International Europe and $8 billion from the parent
Lehman company.
Giddens told the court he hoped to make at least partial
payouts to net equity customers by March or April, adding that
key customer claims disputes will be hashed out in court soon.
But the dispute with the European broker-dealer, slated for
trial in early 2013, is the "elephant in the room," the judge
presiding over Lehman's bankruptcy said on Tuesday.
Judge James Peck said such a timeframe could hamper the
estate's ability to pay creditors. He called for a quick
resolution by all parties, including the Securities Investor
Protection Corp, which is charged with protecting investors of
failed broker-dealers.
EUROPEAN BROKER-DEALER CLAIM
The key area of dispute is Lehman Brothers International
Europe's $8.3 billion "house" claim over money the brokerage
holds on its behalf.
At issue is whether money held on behalf of foreign
affiliates can be considered customer money. If allowed, the
claim could eat up a significant portion of the brokerage's
resources for paying back its customers.
Regardless of the outcome, however, the brokerage will not
be able to make significant payouts on the $47.5 billion in
general creditor claims, which face an "inevitable" shortfall,
Kobak said.
A spokeswoman for Lehman Brothers Holdings Inc declined to
comment after the hearing.
Lehman filed for bankruptcy on Sept. 15, 2008, with $639
billion in assets. The filing was six times larger than any
previous U.S. bankruptcy and was considered to be a key
catalyst to the financial crisis.
The parent company plans on Aug. 30 to ask Peck for
authority to hold an official creditor vote on a plan to let it
emerge from bankruptcy late this year or early in 2012 and to
repay creditors about $65 billion soon afterward.
The case is In re Lehman Brothers Holdings Inc, U.S.
Bankruptcy Court, Southern District of New York, No. 08-13555.
(Reporting by Nick Brown; Editing by Lisa Von Ahn)
www.reuters.com/article/2011/08/09/...amp;feedName=marketsNews
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