Lehman will distribute about $17.9 billion to creditors next week including $12.8 billion to third-party creditors and affiliates.
The payout topping $80 billion would signify a $15 billion increase from the bank’s initial estimate of how much would be returned to creditors.
In a rare interview with Harvard Business School that was published online earlier this month, (it has since been taken down) value investor Seth Klarman spoke at length about his investment process, philosophy and the changes value investors have had to overcome during the past decade. Klarman’s hedge fund, the Boston-based Baupost has one of Read More
Overdelivering in liquidation
According to court papers filed Thursday, a string of recent settlements with other banks and its own foreign affiliates have helped Lehman drive up the recoveries for every major class of the failed investment bank’s creditors. Interestingly, some groups getting as much as 6 cents on the dollar more than Lehman initially estimated.
According to Joseph Checkler and Patrick Fitzgerald of The Wall Street Journal, creditors holding bonds issued by the Lehman parent company are now expected to recover 26.9 cents on the dollar, up from an estimated 21.1 cents when the liquidation plan was approved. Creditors of Lehman’s main derivatives arm, a group that included Goldman Sachs Group Inc. and distressed-debt investor Silver Point Capital, will see their recoveries increase by about 3 cents to 30.9%. General unsecured creditors of Lehman will get more than 25 cents on the dollar, up from less than 20 cents.
Unimaginable in 2008
Earlier this month, it was reported that unsecured creditors to Lehman Brothers would receive a dividend from PricewaterhouseCoopers repaying them in full, six years after the largest bankruptcy in US history kicked the financial crisis into high gear. There have been plenty of signs that initial estimates of how much creditors could expect were too low, and there has been fierce competition among hedge funds to buy them over the last year.
The most recent deal was a $767 million settlement between Lehman Brothers Holdings Inc Plan Trust and Freddie Mac, approved at the end of February, but there have been a string of positive developments over the last few years. Still, repaying creditors in full with some money left over, implying another dividend down the road, would have been unimaginable at the end of 2008.
Lehman was once Wall Street’s fourth largest investment bank before it filed for Chapter 11 on September 15, 2008. Lehman had reported $639 billion of assets at the time, which makes its bankruptcy roughly six times larger than any other in US history. It ended January with $19.2 billion of cash and investments, of which $6.5 billion was unrestricted.