By Patrick Fitzgerald
The official winding down Lehman Brothers Holdings Inc.'s
brokerage business said Wednesday he plans to return another $2.2
billion in cash to former employees and other creditors, more than
six years after the investment bank's collapse.
James W. Giddens, the court-appointed trustee winding down
Lehman's broker-dealer, said in a filing Wednesday in U.S.
Bankruptcy Court in New York that he was seeking court approval to
make another distribution to unsecured creditors. Combined with the
$3.7 billion he has already paid, the brokerage's creditors will
have recovered about 27 cents on the dollar.
"When this liquidation began, the possibility of a general
estate was in doubt, and the fact that general creditors now stand
to receive 27% of their allowed claims is a significant
achievement," Mr. Giddens said in an emailed statement to The Wall
Street Journal.
The trustee began paying back creditors--former employees,
pension funds, banks and investment firms with unsecured claims
against the brokerage--last summer after making the brokerage's
customers whole.
The distinction between "customer" and "creditor" is a crucial
one in the Lehman case. Customer claims get paid before creditors
under the law covering failed broker-dealers, the 1970 Securities
Investor Protection Act.
Mr. Giddens said he would now concentrate on resolving remaining
claims and making further general creditor distributions to close
the estate as promptly as possible.
Individual customers of the U.S. brokerage, which is under the
purview of the bankruptcy court but not technically in bankruptcy
protection, received about $92.3 billion almost immediately after
Lehman collapsed. In all, Mr. Giddens has paid more than $106
billion to customers and hopes to have returned more than $110
billion when he is finished. Customers get 100% of their money
back, while unsecured creditors get much less.
Lehman, once the nation's fourth-largest investment bank by
assets under management, collapsed into the largest bankruptcy ever
in September 2008 with $613 billion in liabilities.
The filing sent markets into turmoil and helped trigger a global
financial crisis. Lehman's brokerage business was quickly sold to
Barclays, and the company's New York-based holding company
officially exited bankruptcy in 2012.
The Lehman estate is still winding down and selling off its
remaining holdings, a process that is expected to continue for
several more years. The brokerage is being unwound separately.
Judge Shelley C. Chapman is overseeing both proceedings.
The bankruptcy judge will consider the trustee's request to
distribute the funds to creditors at a hearing slated for Feb. 19
in New York.
Write to Patrick Fitzgerald at patrick.fitzgerald@wsj.com
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