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 joseph.checkler@dowjones.com and
Patrick Fitzgerald at patrick.fitzgerald@dowjones.com
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