Lehman Brothers Holdings Inc. (PINK:LEHMQ) agreed to settle a lawsuit with its European derivatives affiliate involving more than $38 billion bankruptcy claims, according to a report from Bloomberg.
The settlement agreement would remove the last hindrance to the distribution of assets to creditors and customers.
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In a statement, James Giddens, a trustee supervising the liquidation of the assets of Lehman Brothers Holdings Inc. (PINK:LEHMQ), said, the settlement is subject to the approval of both the United States bankruptcy Court and the English High Court. He said, “The agreement sets the stage for distributions that will provide for 100 percent recovery of customer property. It will allow for customer and creditor distributions much sooner than if LBIE’s claims involving hundreds of thousands of transactions were litigated.”
Elliot Management Corp. was one of the institutional creditors, who are demanding Lehman Brothers to distribute its assets to hedge funds and banks after four years of liquidation.
Last year, Lehman Brothers International Europe (LBEI), said the failed investment bank owed $8.3 billion to clients. Giddens said the claims against Lehman Brothers European unit was the “largest unresolved contingency” in the investment bank’s liquidation.
A related report from Market Watch cited that the $6 billion bankruptcy claims of Lehman Brothers Finance AG, the former Swiss-based derivatives unit of the failed investment bank were reduced to $550 million. According to Giddens, $190 million out of the $550 million will be returned to customers with high priority status, while the remaining $360 million will be considered as an unsecured claim.
In September 2008, Lehman Brothers Holdings, Inc. filed a Chapter 11 bankruptcy protection, which is the largest bankruptcy in the history of the United States. It was once the fourth largest bank in the country.
Lehman Brothers Holdings Inc. (PINK:LEHMQ) initially distributed $22.5 billion to creditors. Last week, the failed investment bank paid another $10.5 billion. Under its Chapter 11 plan, Lehman Brothers is scheduled to distribute its third payment on March 30, 2013.
The Securities Investor Protection Corporation authorized Giddens to oversee the liquidation of Lehman Brothers broker-dealer business. Giddens liquidation team transferred the estimated $92 billion worth of brokerage accounts (more than 110,000), including customer accounts worth $40 billion, to Barclays PLC.
In July, James Peck, the federal judge supervising the liquidation of Lehman Brothers’ brokerage unit, ruled in favor of the trustees. Judge Peck ruled that creditors should receive payment first, before hedge funds and money managers.
In September, Judge Peck also ordered Lehman Brothers to pay the legal fees incurred by its creditors, including White & Case LLP, legal counsel of the Ad Hoc Group led John Paulson’s hedge fund company; Cleary Gottlieb Steen & Hamilton LLP, the law firm represented Goldman Sachs Group, Inc. (NYSE:GS).
The Judge also ordered Lehman Brothers to pay the legal fees incurred by Brown Rudnick LLP, that represented a group of creditors, including Citi Group Global Markets, Royal Bank of Scotland, and Aurelius Capital.