UPDATE 1-Hedge funds may get $11 bln frozen at Lehman

* Lehman Brothers Intl (Europe) sets plan to return assets

* LBIE would permit return of $11 bln by end of March

* PwC says plan needs approval by 90 percent of clients

By Joseph A. Giannone

NEW YORK, Nov 23 (Reuters) - Lehman Brothers International (Europe), where more than $35 billion of hedge fund assets have been frozen since the bank's collapse last September, could return about $11 billion to fund managers by March if enough firms approve a new plan.

PricewaterhouseCoopers [PWC.UL], administrators for bankrupt Lehman's London-based unit, announced on Monday a proposal that would let hedge funds recover their assets held in custody by Lehman Brothers International (Europe), or LBIE. The scheme requires approval by 90 percent of Lehman's clients.

"This agreement has been negotiated over the last six months and will now allow us to return a further $11 billion or so of trust assets to their rightful owners," Steven Pearson, joint administrator for LBIE and a PricewaterhouseCoopers partner, said in a statement.

Hundreds of hedge funds were left hanging last September when New York-based Lehman filed for bankruptcy. More than $35 billion of assets that they entrusted to Lehman's London unit have been frozen as part of the receivership process.

The proposal, which will be sent to fund managers Tuesday, would return assets to funds and close out positions without the need to post further collateral. LBIE's creditors' committee supports the plan unanimously.

Clients have until Dec. 29 to vote on the plan. PwC hopes to set a deadline for filing claims at the end of February and return assets before the end of March.

The claim resolution agreement follows an earlier attempt by PwC to speed up returns of hedge fund assets that was struck down by British courts. PwC also said the latest plan will address LBIE assets held by Lehman's U.S. affiliate, Lehman Brothers Inc.

PwC has warned that without a court-approved or client-approved plan, it could take many years and even a decade before claims can be reviewed and assets returned to their owners.

So far $13.3 billion of assets have been returned, while $11.4 billion of securities and cash have been recovered from various third parties and are available for return

LBIE is also trying to claim $7.2 billion of cash and assets held by Lehman Brothers affiliates in the United States and Asia.

The LBIE Creditors' Committee is comprised by Ramius Credit Opportunities Master Fund Ltd, GLG European Long/Short Fund, Legal and General Pensions Ltd, Oceanwood Global Opportunities Master Fund and Lehman Brothers Holdings Inc (LEHMQ.PK). (Reporting by Joseph A. Giannone; Editing by Tim Dobbyn) ((joseph.giannone@thomsonreuters.com; +1 646 223 6184; Reuters Messaging: joseph.giannone.reuters.com@reuters.net ))