Lehman Exits Bankruptcy, Sets Distribution To Creditors

   By Patrick Fitzgerald 
   Of DOW JONES DAILY BANKRUPTCY REVIEW 
 

Lehman Brothers Holdings Inc. (LEHMQ) on Tuesday officially emerged from Chapter 11 bankruptcy protection after nearly three and half years and said creditors of the investment bank will start getting paid next month.

Lehman, once the nation's fourth largest investment bank collapsed in September 2008 in the largest bankruptcy in history, has some $10.5 billion it intends to start doling out to creditors on April 17 under an initial distribution.

Since its collapse a team of bankruptcy professionals under the direction of Alvarez & Marsal Inc.'s Bryan Marsal and John Suckow has managed Lehman's assets, including real-estate holdings, corporate debt and derivatives.

"We are proud to announce Lehman's exit from Chapter 11 and entrance into the final stage of this process--distributions to creditors," Suckow, who has been serving as Lehman's president, said in a statement.

Although Lehman has emerged from bankruptcy, its case is far from over and will likely continue for years as it liquidates its assets. Lehman's new seven-member board of directors, which includes executives and directors of businesses and subsidiaries related to Delphi Automotive PLC (DLPH), Morgan Stanley (MS), American International Group Inc. (AIG) and Capmark Financial Group Inc. (CPMK) will guide the company's liquidation.

Among Lehman's creditors awaiting payment include both small investors and large, among them hedge-fund managers Paulson & Co. and Elliott Management, Goldman Sachs Group Inc. (GS) and Silver Point Capital.

Late last year, U.S. Bankruptcy Judge James Peck approved Lehman's creditor-payback plan, which should distribute about $65 billion and treats creditors of Lehman subsidiaries better than those of the parent company.

Since then, the investment bank has been involved in settlement negotiations with creditors like the Internal Revenue Service, Fannie Mae (FNMA) and insolvency administrators of more than 80 Lehman affiliates over disputed claims.

A second distribution is tentatively scheduled for Sept. 30. However that payout could be reduced pending the outcome of a legal fight over intercompany loans and derivatives guarantees between Lehman and its Switzerland-based affiliate, Lehman Brothers Finance AG, which conducted most of the bank's foreign derivatives business.

(Dow Jones Daily Bankruptcy Review covers news about distressed companies and those under bankruptcy protection.)

-By Patrick Fitzgerald, Dow Jones Daily Bankruptcy Review; 202-862-3544; [e-mail]