NEW YORK Lehman Brothers Holdings Inc LEHMQ.PK told a bankruptcy judge on Tuesday it has resolved or pushed off eight of the 18 objections to its plan outline to pay creditors back $65 billion and end the biggest bankruptcy in U.S. history.
The company, seeking bankruptcy court permission to let creditors vote on its plan, reached new settlements with affiliates in Singapore and the Netherlands, Lehman lawyer Harvey Miller said at a U.S. Bankruptcy Court hearing.
It still faces objections from Fidelity National Title Insurance Co, Mason Capital Management LLC, Centerbridge Credit Advisors LLC and others, Miller said.
Lehman has faced off with angry creditors for years but is now dealing with a relatively small list of objections for a case its size because it was able to get powerful critics, including distressed investors and former trading partners, on its side prior to the hearing.
Approval of the outline would provide a glimmer of light for an end to the three-year bankruptcy, allowing creditors to hold a November 4 vote on the payout plan.
But the hearing is likely to be a lengthy process, with Judge James Peck budgeting nearly two days for the process and warning a packed courtroom they were likely in for a "long day."
AN ORDERLY PROCESS
Invoking Winston Churchill, Miller said he hoped the hearing represents the "beginning of the end" of Lehman's bankruptcy, rather than the "end of the beginning."
But obstacles remain to its emergence and its ability to start paying back the investors who lost billions. Even after creditors and the court approve the reorganization plan, Lehman must meet certain financing and other conditions outlined in it, a process that could take days, weeks or months, a company spokeswoman said last week. Lehman has said it hopes to begin creditor payouts in the first quarter of 2012.
Judge Peck told a packed courtroom he wanted an orderly hearing, saying he would listen to legitimate objections to the plan outline, but said objections to the plan itself should be reserved for the confirmation stage of the plan process.
"I am not going to permit the hearing to become what amounts to a preview of coming attractions of what will be presented at the time of" plan confirmation, Peck said, asking lawyers to "behave as grownups." Video feeds were set up in two additional rooms as hundreds gathered for the hearing.
$360 BILLION IN CLAIMS
The investment bank faces about $360 billion in allowed claims, Miller said. That figure represents an increase from earlier estimates of about $320 billion. Creditors will recover about $65 billion, or an average of 20 cents on the dollar.
Lehman has support from most of its largest creditors, including two groups that hold a combined $100 billion in claims, nearly one-third of the total claims against Lehman.
Those groups include a bondholder group led by hedge fund Paulson & Co, and derivatives creditors such as Goldman Sachs Group Inc (GS.N) and Morgan Stanley (MS.N). Asian affiliates holding about $20 billion in claims have also pledged support.
Lehman filed for bankruptcy on September 15, 2008, with $639 billion in assets. The filing was six times larger than any previous U.S. bankruptcy and was considered to be a key catalyst to the financial crisis.
The case in In re Lehman Brothers Holdings Inc, U.S. Bankruptcy Court, Southern District of New York, No. 08-13555.
(Reporting by Nick Brown; editing by Andre Grenon and Gunna Dickson)