Lehman Brothers Holdings Inc Plan Trust (OTCMKTS:LEHMQ)’s unsecured general creditors are set to receive an initial payout of $4.6 billion as soon as next month from the trustee overseeing the firm’s liquidation.
The brokerage trustee, James W. Giddens, said he anticipates making the first payment of $4.6 billion to unsecured creditors on September 10.
ValueWalk's Raul Panganiban interviews Joseph Cioffi, Author of Credit Chronometer and Partner at Davis + Gilbert where he is Chair of the Insolvency, Creditor’s Rights & Financial Products Practice Group. In the interview, we discuss the findings of the 3rd Annual report. Q2 2021 hedge fund letters, conferences and more The following is a computer Read More
Lehman Brothers: Over-delivering in liquidation
Lehman Brothers was Wall Street’s fourth largest investment bank before it filed for Chapter 11 on Sept. 15, 2008. Lehman’s bankruptcy is considered roughly six times larger than any other in U.S. history. In March, it was reported that Lehman will distribute about $17.9 billion to creditors, including $12.8 billion to third-party creditors and affiliates.
The latest payout announcement on Friday represents a recovery of about 17% of total unsecured claims against the brokerage. In a press release, Giddens said: “That such a distribution is even possible represents an extraordinary achievement that was far from certain when the liquidation began.” He indicated that additional payments are likely in the future, although he didn’t disclose how much or give a timetable for later distributions.
Under the 1970 Securities Investors Protection Act, customer claims get precedence over those of creditors.
Distribution a milestone
Giddens indicated that of the total $4.6 billion earmarked for distribution, about $3.5 billion has been allocated for unsecured claims that have already been approved and $1.1 billion for pending unsecured general creditor claims. The investment bank’s brokerage creditors include banks, pension funds, hedge funds, former employees and Lehman affiliates.
The Securities Investor Protection Corporation, the organization that insures customers of brokerage firms against losses, applauded the planned distribution announced Friday. The president of the corporation said: “The fact that customer claims have been fully satisfied and that unsecured general creditors are now receiving a significant distribution is an extraordinary achievement.”
Earlier this month, liquidators for Lehman Brothers Holdings Inc Plan Trust (OTCMKTS:LEHMQ) announced a further increase of over 10% in estimated recoveries. This announcement will please hedge funds such as Paulson & Co., which bought out the company’s debt following its collapse six years ago.