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Lehman has filed court papers to seek approval for the outline of its $65bn payback plan |
Lehman filed court papers in US Bankruptcy Court in Manhattan asking Judge James Peck to approve the outline for its $65bn payback plan in the face of 18 objections from various parties, including one from the office of US Trustee Tracy Hope Davis.
If Peck green-lights the outline, it will be sent to creditors for a vote. Lehman, which has negotiated nonstop with creditor groups in an attempt to gain widespread support for its plan, hopes to end its bankruptcy and begin paying back creditors by early 2012.
The trustee argued in an August 11 objection that the outline was too vague on certain issues, including the post-bankruptcy role of the committee installed to oversee fee requests from professionals in the case.
Lehman said it will add language explaining that the committee will continue to exist post-bankruptcy and will be disbanded after professionals submit their final fee applications.
The company also agreed to add a paragraph specifying the future fate of Lamco, its asset management entity, after the trustee requested more information.
Chief executive Bryan Marsal told Reuters last week Lehman was shelving plans to try to turn Lamco into a long-term business in the face of opposition from creditors.
Objections from the US Trustee, a Justice Department agency that oversees bankruptcy cases, can be influential because that office, unlike creditors, ensures compliance with bankruptcy laws and does not have a stake in the outcome.
Lehman was more steadfast about objections from other creditors, such as Bundesverland deutscher Banken eV and Mason Capital Management, which said the plan was too vague about how Lehman would treat creditors of non-bankrupt foreign affiliates. Lehman said those objections should be put off until the plan confirmation stage of the bankruptcy.
Wilmington Trust Co, trustee for between $49bn and $73bn in claims, withdrew its objection that Lehman did not give enough information on how structured securities claims would be treated.
Lehman characterised its plan as an “array of compromises,” praising “Herculean” negotiation efforts that yielded support from the key members of its “vast and diverse” creditor pool.
Included among the supporters are two groups that hold nearly one-third of the roughly $320bn in overall claims against Lehman. Those groups – a bondholders led by hedge fund Paulson & Co, and derivatives creditors, including Goldman Sachs Group and Morgan Stanley – proposed their own plans before accepting Lehman’s compromise.
Asian affiliates holding about $20bn in claims have also pledged support.
Lehman’s plan would pay creditors an average 20¢ on the dollar. Some groups would receive more, including derivatives creditors who would get nearly 28¢ on the dollar.
If Peck approves the plan outline, creditors would vote on it on November 4 and it could win court approval as early as December.
Lehman filed for bankruptcy on September 15, 2008, with $639bn in assets. The filing was six times larger than any previous US bankruptcy and was considered to be a key catalyst to the financial crisis.