Lehman reaches settlement with German affiliate

NEW YORK Thu Feb 3, 2011 3:40pm EST

NEW YORK Feb 3 (Reuters) - Bankrupt financial company Lehman Brothers Holdings Inc LEHMQ.PK has reached an agreement with its German affiliate Lehman Brothers Bankhaus that will allow $6.6 billion of the German bank's claims against the parent company.

Bankhaus, Lehman's second-largest foreign affiliate, said in a statement on Wednesday that it has also decided to support the revised plan of reorganization filed by Lehman Brothers Holdings last week.

Settling intercompany claims has been one of the most complex parts of Lehman's bankruptcy because of the large number of transactions between the parent company and its subsidiaries.

The settlement must still be approved by German and U.S. bankruptcy courts.

"This agreement is a milestone in the resolution of the Lehman proceedings and is in line with our overall approach to favor compromises with affiliates and avoid lengthy and costly litigation," Lehman's chief executive, Bryan Marsal, said in a statement.

Lehman last week proposed a new plan for dividing up billions of dollars among its creditors and offered a bigger payment to bondholders, provided they support the plan.

The plan, key to Lehman's exit from the largest bankruptcy in U.S. history, came after an earlier version filed in April met strong opposition from hedge fund Paulson & Co, the California Public Employees Retirement System and other bondholders. For details click on [ID:nN2596652]. (Reporting by Dena Aubin, editing by Matthew Lewis)

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