March 1, 2021

DealBook: Lehman Bankruptcy Takes Big Step Toward an End

Lehman Brothers’ headquarters in New York on the day it filed for bankruptcy in 2008.Mark Lennihan/Associated PressLehman Brothers’ headquarters in New York on the day it filed for bankruptcy in 2008.

A federal bankruptcy judge has blessed a plan by Lehman Brothers’ bankruptcy estate to pay out about $65 billion to creditors, in a major step to wind down the investment bank.

The approval by Judge James M. Peck of the federal bankruptcy court in Manhattan, who has overseen Lehman’s Chapter 11 case, paves the way for a vote by creditors sometime this fall.

Begun on Sept. 15, 2008, the Lehman bankruptcy case touched off the financial crisis that reshaped the banking landscape. Since then, the estate has sold off significant portions of the firm’s business and assets, seeking to recover some money for scores of institutions around the world.

The labyrinthine disclosure statement — months in the making — followed months of clashes between Lehman and its bondholders and other institutions to which the firm owes billions of dollars.

Lehman revised the scheme several times in order to earn the support of several major creditors, including Paulson Company, Elliott Management and Goldman Sachs.

Lehman’s disclosure statement for the plan will be sent to the estate’s 110,000 creditors, who will have 60 days to vote. A confirmation hearing is scheduled for Dec. 6, pending approval by creditors.

Lehman has said that it hopes to begin paying creditors by early next year, more than three years since it sank into bankruptcy. That is pending the shareholder vote and meeting certain financial milestones.

Final revisions to the disclosure statement came in as late as Tuesday morning, when lawyers for Wells Fargo agreed to drop objections to the plan. But other creditors, including the Bundesbank and the hedge fund Centerbridge Partners, still had objections.

Judge Peck overruled those objections for now, saying that they would be heard in the confirmation hearing.

He called the disclosure agreement’s approval “an extraordinary and noble achievement,” and said that the lawyers on both sides had done work that “borders on miraculous” by bringing major groups of creditors into agreement on a plan.

Lehman Brothers’ motion

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