Lehman files new plan to pay creditors
LEHMAN Brothers Holdings Inc said it has received a wider base of support from creditors for its reorganization, and filed a new plan it hopes will help it emerge from bankruptcy and pay creditors faster.
The company said it believes it has an “agreement in principle” with major creditor groups on an amended reorganization plan filed in US Bankruptcy Court in Manhattan. This includes support from a committee of unsecured creditors, Lehman said.
The compromise is a “reasonable, fair and efficient means to resolve and avoid the vexatious, multifaceted and protracted litigation and delay that might otherwise occur,” Lehman said in a court filing yesterday.
Lehman had been the fourth largest US investment bank prior to filing for Chapter 11 protection from creditors on September 15, 2008, with an estimated US$ 639 billion of assets. Its bankruptcy filing remains the largest in US history, and was a major trigger for the global financial crisis.
Bryan Marsal, Lehman’s chief executive and a restructuring specialist, has said the company expects to distribute roughly US$ 60 billion to creditors who have roughly US$322 billion of allowed claims, equal to about 18.6 cents on the dollar.
According to court papers, a key change from Lehman’s earlier proposed plan is that various sums that would have gone to creditors of several Lehman subsidiaries will instead go to unsecured creditors of Lehman’s parent company.
Despite this, holders of unsecured debt from Lehman’s parent would receive about 21.1 cents on the dollar, down from 21.4 cents under an earlier Lehman plan.
Some creditors, such as a group that includes hedge fund manager John Paulson, had been seeking roughly 24 cents on the dollar.
Unsecured creditors of Lehman Brothers Special Financing Inc, the company’s derivatives unit, would receive 27.9 cents on the dollar under the revised plan.