A group of Australian towns, charities and churches who
purchased risky U.S. mortgage-backed securities sold by Lehman
Brothers Holdings Inc.'s Australian unit settled their class-action
lawsuit against the failed investment bank, paving the way for the
creditors to recover $300 million in the coming year.
PBB Advisory, the liquidators of Lehman Brothers Australia Ltd.,
said Monday that creditors of dozens of Australian councils,
churches and charities that invested in collateralized debt
obligations, or CDOs, with Lehman Brothers Australia could expect
to begin receiving checks early next year.
"We are hopeful of making distributions to all creditors in or
around the first quarter of 2014," said PBB's Marcus Ayres in a
statement.
The proposed $300 million distribution would come on top of an
earlier $250 million paid out directly to Australian councils and
charities from their Lehman-originated investments.
The latest settlement, which requires an Australian court's
approval, will speed recoveries of more than 50 cents on the dollar
for the Australian investors that sunk hundreds of millions of
dollars into CDOs, a type of security backed by a mix of bonds,
loans and other assets that later imploded.
An Australian court ruled last year that Lehman Brothers
Australia misled unsophisticated investors about the risks
associated with the CDOs and was responsible for the investors'
losses.
IMF (Australia) Ltd. (IMF.AU), a Australian litigation funding
company that backed the class-action lawsuit against Lehman in
return for a cut of any recovery, said Monday it expects to receive
between $30 to $40 million from the distribution.
Previous attempts to settle the class-action lawsuit were
hampered by the risk of jeopardizing insurance recoveries. But last
month a group of insurers agreed to pay $48 million to settle
Australian investors' CDO claims.
"Securing this insurance settlement was a critical first step in
unraveling the estate," Mr. Ayres said, adding that the
class-action settlement will bring total recoveries to more than
$550 million, "which is an excellent outcome for local creditors
caught up in what has been the largest corporate collapse in
history."
Lehman Australia filed for the equivalent of bankruptcy
protection in Australia in 2009 with a plan that liquidators would
sell off the unit's assets and wind down the business.
The collapse of Lehman's New York-based holding company in
September 2008 triggered foreign bankruptcy proceedings for more
than 80 of the bank's far-flung affiliates. Lehman has reached
settlements on intercompany claims with virtually all of its
foreign affiliates, including those in the U.K., Switzerland, Japan
and Hong Kong.
Lehman's New York-based holding company has paid creditors
nearly $50 billion since officially exiting from bankruptcy
protection in March 2012. That figure is expected to grow to more
than $80 billion, Lehman said earlier this summer.
Although Lehman's holding company is out of bankruptcy, the
remnants of its estate continue to wrangle with creditors over
billions of dollars in disputed claims. The case is expected to
continue for several more years as the New York-based team
liquidates the estate's assets.
(Dow Jones Daily Bankruptcy Review covers news about distressed
companies and those under bankruptcy protection. Go to )
Write to Patrick Fitzgerald at patrick.fitzgerald@wsj.com
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