Lehman to Pay Another $3.8 Billion to Creditors
September 29 2016 - 10:20AM
Dow Jones News
The team winding down Lehman Brothers Holdings Inc. said
Thursday it would be paying out $3.8 billion to creditors next
week, more than eight years after the investment bank's collapse
triggered the financial crisis.
The distribution, the 11th since the investment bank failed in
2008, will bring the total payout in the firm's bankruptcy to more
than $113.6 billion. The bulk of the cash---$83.6 billion---has
gone to pay so-called third-party, or non-Lehman claims.
Lehman said Thursday in a filing in U.S. Bankruptcy Court in New
York that its senior unsecured creditors, Lehman bondholders who
were estimated to receive about 21 cents on the dollar when the
bank's bankruptcy plan went into effect in early 2012, will have
recovered more than 40 cents on the dollar after the next
distribution is completed.
The chapter 11 payment plan for Lehman treats similarly situated
creditors of its subsidiaries better than those of the parent. For
example, general unsecured creditors of Lehman's Special Finance
unit, the heart of the failed investment bank's derivatives
business, have so far recovered more than 37 cents on the dollar,
though they are limited to how much they can claim.
General unsecured creditors of Lehman's commodities unit,
meanwhile, will have received nearly 79 cents on the dollar
following the latest distribution.
The boost in recoveries has come from gains in the estate's real
estate, derivatives and private-equity investments, Lehman has
said.
Among Lehman's remaining holdings is its stake in the Formula
One racing circuit, which John Malone's Liberty Media Corp. has
agreed to buy for $4.4 billion. The circuit, with races scattered
across the globe, has long been a cash cow for Lehman and its other
owners. Lehman's ownership stake is worth about $530 million.
Lehman acquired its take in Formula One after German mogul Leo
Kirch's media empire collapsed in 2002. The investment bank sold
this stake to majority owner CVC Capital Partners but then
reinvested in the circuit as part of the private-equity firm's deal
to acquire the sport.
A Lehman spokeswoman declined to comment on the Formula One
sale.
For Lehman's unsecured creditors, among them a number of hedge
funds such as Paulson & Co. that spent the years after Lehman's
collapse buying up bankruptcy claims at steep discounts, the
increased recoveries are adding hundreds of millions in profits
already booked.
Lehman, once the nation's fourth-largest investment bank,
collapsed into the largest bankruptcy ever in September 2008 and
its U.S. brokerage business was quickly sold off to Barclays
PLC.
After the bank failed, some creditors bailed out, not wanting to
wait for their money or to take a chance they wouldn't get paid at
all. Hedge funds were willing buyers of their claims at steep
discounts, betting they would gain in value after the initial panic
subsided.
That bet has become fruitful. Since the bankruptcy, Lehman has
consistently increased estimates of how much creditors would get
back, helping hedge-fund managers such as Paulson and Paul Singer's
Elliott Management rake in big profits.
A team of bankruptcy professionals under the direction of
turnaround firm Alvarez & Marsal managed the New York holding
company's assets until Lehman's exit from bankruptcy in 2012, when
a reorganized company emerged, overseen by a new board.
In all, Lehman still has about $5.7 billion in remaining
investments to unwind and more money to pay creditors. The bank,
which is expected to exist in some form for several more years,
said that checks to creditors will go out on Oct. 6.
Write to Patrick Fitzgerald at patrick.fitzgerald@wsj.com
(END) Dow Jones Newswires
September 29, 2016 11:05 ET (15:05 GMT)
Copyright (c) 2016 Dow Jones & Company, Inc.
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