Lehman, creditors agree on plan approval timeline

NEW YORK Wed Apr 13, 2011 6:41pm EDT

NEW YORK (Reuters) - Lehman Brothers Holdings Inc (LEHLQ.PK) and its creditors have agreed to put all competing plans to restructure the company on the same timeline for court approval, the company told a bankruptcy judge on Wednesday.

But Lehman, in Chapter 11 since it imploded in the midst of the financial crisis in 2008, said it might still argue that its own plan should be the first to be voted on by creditors.

The accord was reached in private talks with an ad hoc creditor group led by hedge fund Paulson & Co and the California Public Employees' Retirement System (Calpers), Lehman said at a hearing in U.S. Bankruptcy Court in Manhattan.

The Paulson group proposed a competing reorganization plan in December that would boost bondholder recoveries to nearly 25 percent, about three percent higher than proposed recoveries under Lehman's plan.

Under the agreement announced on Wednesday, Lehman will allow Paulson to seek court approval for its plan at a hearing on June 28, the same day Lehman's plan is slated for consideration.

The agreement preserves Lehman's right to argue that, once approved by the court, its plan should be the first to go to creditors for a vote.

Some creditors initially believed Lehman had waived its right to raise such objections in the future, according to a motion filed by Lehman last Thursday.

That position was the result of an "over-excited" misinterpretation, according to the motion. Lehman said it was willing to put competing plans on the same calendar, but never agreed to waive objections to the ultimate approval process.

The Paulson group is the only creditor group so far to offer a competing plan, but a handful of banks, including Goldman Sachs Group Inc (GS.N) and Morgan Stanley (MS.N), have indicated they may propose a third plan.

The Paulson group, which claims about $20 billion from Lehman, said the company's plan favors large banks that were creditors of its derivatives business.

While Lehman's latest plan would provide 21.4 percent recovery for the Paulson group and other bondholders -- up from 14.7 percent in its original plan -- it would also provide more than 34 cents on the dollar for derivatives creditors.

The Paulson group's proposal would yield a 24.5 percent recovery for bondholders and 25.7 percent for derivatives creditors.

Lehman filed for Chapter 11 protection on September 15, 2008. At the time, it reported $639 billion of assets, six times more than any other U.S. company to go bankrupt.

(Reporting by Nick Brown; editing by Dave Zimmerman and Andre Grenon)

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