Analysis: Competing Lehman bankruptcy plan could push talks

NEW YORK (Reuters) - Almost since Lehman Brothers Holdings Inc LEHMQ.PK collapsed in September of 2008 it has been working on a plan to pay back creditors.

And now that a group of unhappy bondholders -- including the county of San Mateo, California -- has put out its own roadmap for paying out against the hundreds of billions of dollars of claims made by creditors, the failed financial company may get a leg up to do so, experts said.

Lehman first proposed its own plan for getting out of bankruptcy back in March in which it may pay back creditors according to what they are owed by each Lehman entity. It has since been working on a revised version of that plan, which it has planned to file by the end of this year.

The bondholders, which also include Paulson & Co, the California Public Employees' Retirement System (Calpers) and Fir Tree Partners, meanwhile, have submitted a proposed restructuring plan for Lehman in which it would make payments against one consolidated pool of assets.

At stake in the battle for control of the roadmap for Lehman's remaining assets is the amount that the various classes of creditors receive from the company and when they actually receive it.

A spokeswoman for Lehman declined to comment on Thursday about how the competing plan would affect the timing for its revised plan or Lehman's path out of bankruptcy. The company said in a statement on Wednesday it would file a plan shortly and give a status update to bankruptcy court on January 13.

As initially proposed, Lehman will emerge from bankruptcy organized around some core assets such as commercial real estate which will be managed by a new company called Lamco.

NEGOTIATING LEVERAGE

Filing a competing plan for what is called "substantive consolidation" with the bankruptcy court can be a tactical move designed to push negotiations, said Jack Williams, a bankruptcy professor at Georgia State University.

"It can be an attempt to generate leverage or begin the process where they are going to play out their leverage," Williams said.

Indeed, two sources familiar with the matter said that putting the plan out in the open will likely push forward negotiations between the bondholders, other creditors not involved in the plan and the debtor group.

The detailed version of the bondholder's plan, known as the disclosure statement, actually offers up a settlement that is one step down from a full consolidation.

"It can avoid some of the costs and extended timing that would come with litigation on consolidation," one of the sources said. "That would accelerate timing of recoveries."

Another source said that getting the information out into the public would give more information to the other creditors not in the bondholder group talks and help get a settlement.

Under Lehman's current timetable, the company has said it hopes to put a plan to a vote in the first quarter of 2011.

One bankruptcy professor said that it gives the bondholders negotiating leverage.

"It gives the bondholders the opportunity to go to the court with this. If they don't put out a plan all they can do is ask for a settlement, but they can't do anything to actually force a settlement," said Lynn LoPucki, a professor at the UCLA Law School.

Lehman lost the right to exclusively present its own plan after it had been in bankruptcy for about 18 months. That alone argues for a settlement, he said.

"I did a study of what happened after exclusivity was lifted and what we found was that the cases almost invariably settled. Competing plans were sometimes introduced, but the final plan was usually a joint plan," he said.

(Reporting by Caroline Humer; Editing by Richard Chang)