NEW YORK (Reuters) - The trustee liquidating Lehman Brothers’ collapsed brokerage will begin a round of distributions on Friday that should result in institutional customers getting all their money back, trustee James Giddens said.
A settlement announced earlier this year between the brokerage, Lehman’s defunct parent company and its European affiliate will provide for full payments for hedge funds, corporate affiliates, counterparties and other customers, Giddens said in a statement on Friday.
It was unclear how long the payouts would take. Jake Sargent, a spokesman for Giddens, said the distributions would be “completed as promptly as possible.”
Corporate entities with customer claims against Lehman’s U.S. broker-dealer have been waiting nearly five years for their money, as Giddens, the trustee tapped to administer the broker’s estate, has worked to determine exactly how much money was available to pay them back.
The linchpin to quantifying the estate’s assets was a deal announced in February under which Giddens allowed Lehman’s parent company to assert a $2.3 billion customer claim against the brokerage, and allowed a $9 billion customer claim to Lehman’s European unit. Both amounts were less than originally sought by the affiliates, freeing up a bit more money for other institutional customers.
The total customer payback will top $100 billion after the latest round of distributions, Giddens said. That includes about $92 billion that was paid to retail customers shortly after Lehman’s parent collapsed in 2008.
“The system to protect customer property worked, and that is good news for the former Lehman customers caught up in the bankruptcy,” Giddens said in the statement.
Lehman’s parent filed the largest Chapter 11 bankruptcy in history on September 15, 2008, with about $639 billion in assets. Its collapse helped to unleash the global financial crisis.
Giddens was appointed to unwind the broker’s estate by the Securities Investor Protection Corp (SIPC), which insures customers of securities investment vehicles that go bust.
SIPC on Friday applauded the milestone, which it cited as the largest-ever return of property to brokerage customers.
“With the return of all customer property, no advances from the SIPC fund will be necessary to make securities customers whole,” SIPC said in a statement.
Leftover money in the estate will go toward repaying roughly 12,000 non-customer general creditor claims. It remains unclear how much money will be available to those customers.
Giddens is embroiled in litigation with Barclays Plc over the rights to as much as $8 billion in assets associated with Barclays’ 2008 purchase of the Lehman brokerage.
Lehman’s parent exited bankruptcy last year, moving ahead with a liquidation plan that will repay about $65 billion to its own creditors, amounting to 20 cents and 30 cents on the dollar for various classes of creditors.
The brokerage liquidation is In re Lehman Brothers Inc et al, U.S. Bankruptcy Court, Southern District of New York, No. 08-1420.
The bankruptcy of Lehman’s parent is In re Lehman Brothers Holdings Inc, in the same court, No. 08-13555.
Reporting by Nick Brown; Editing by Jeffrey Benkoe