Lehman Increases Estimate of Cash Levels to $80.6 Billion

   By Joseph Checkler 
 

Recent settlements have led Lehman Brothers Holdings Inc. to increase estimates of its cash levels to $80.6 billion, $15.8 billion more than it said at this time last year.

In filings made Tuesday with U.S. Bankruptcy Court in Manhattan, Lehman said that settlements with its Swiss derivatives unit and the trustee unwinding its brokerage contributed to the increase. So did its $6.5 billion sale in a stake of the apartment-building owner Archstone Inc. to Equity Residential and AvalonBay Communities Inc. (AVB).

Ever since a judge approved Lehman's historic creditor-payback plan in December 2011, the failed bank has called an initial $65 billion estimate a low-end number but that it couldn't be sure. It increased the estimate to $67.5 billion last August but still had key settlements to reach. Now, with deals including the historic pact among the bank, brokerage trustee James W. Giddens and a U.K. affiliate completed, Lehman feels more comfortable increasing those estimates.

The deal with the Swiss unit, Lehman Brothers Finance AG, may double recoveries for that subsidiary's recoveries. While the deal has been approved by a bankruptcy judge, it still isn't finalized.

Lehman has already distributed more than $47 billion to creditors and plans to continue making "semi-annual" distributions as it continues gathering cash. Recently, the company has been selling claims it has against the brokerage, generating cash that it can return to the creditors.

Savvy hedge funds have aggressively bought up Lehman claims for a few years now, profiting as the distribution estimates have increased and paybacks made.

Lehman's collapse became an enduring symbol of one of the great financial crises in U.S. history. Its U.S. brokerage business was quickly sold to Barclays PLC (BCS), but the remnants of the company still exist in billions of dollars of assets being overseen by Alvarez & Marsal and Mr. Giddens's wind-down of the brokerage business under the terms of the Securities Investor Protection Act.

Individual customers of the brokerage received all $92.3 billion they were owed almost immediately after Lehman's bankruptcy. The bulk of the Lehman customer accounts, with assets of more than $40 billion, have been transferred to Barclays PLC.

Other customers of the brokerage---mostly hedge funds and big banks---had to wait as Mr. Giddens sorted out claims issues both in the U.S. and overseas.

But now that he's reached historic settlements with many foreign counterparties, Mr. Giddens too has begun unloading his coffers to pay back those customers.

(Dow Jones Daily Bankruptcy Review covers news about distressed companies and those under bankruptcy protection. Go to http://dbr.dowjones.com)

Write to Joseph Checkler at [e-mail] and Patrick Fitzgerald at [e-mail]

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