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Lehman Brothers' liquidation plan goes into effect

by Roger Dent  |  Published March 7, 2012 at 12:07 PM
Lehman Brothers Holdings Inc. announced Tuesday, March 6, that its liquidation plan has taken effect, ending the 3-1/2 year bankruptcy case that turned the financial world on its head.

"We are proud to announce Lehman's exit from Chapter 11 and entrance into the final stage of this process -- distributions to creditors," said John Suckow of Alvarez & Marsal LLC, Lehman's president and chief operating officer, in a Tuesday statement. "Our objective remains to provide the best results possible for creditors -- by continuing to strategically position assets to produce strong values, to pursue the resolution of disputed claims and other matters in litigation, and to manage expenses in line with the asset disposition process. We thank the hundreds of Lehman employees and outside professionals who have worked hard and diligently since September 2008 to achieve this monumental result."

According to the statement, distributions will be made to record holders of claims on March 18, and creditor distributions will commence April 17.

The end of Lehman's bankruptcy case comes after Judge James Peck of the U.S. Bankruptcy Court for the Southern District of New York in Manhattan confirmed the former investment bank's liquidation plan on Dec. 6.

The plan, filed Sept. 1, allows Lehman to unwind its remaining holdings, including real estate, commercial loans and private equity and principal investments, in the years following the effective date of the plan. Lehman estimated, for example, that liquidating its real estate would produce $13.2 billion in gross proceeds over the four years ended Dec. 31, 2014. Loans and investments would add an additional $4.8 billion and $9.5 billion, respectively.

The plan separates the creditors of each of 23 bankrupt affiliates and does not substantively consolidate the debtors. It does, however, reallocate a portion of distributions from certain classes of creditors who would receive a lower distribution with substantive consolidation to creditors that would benefit from this remedy.

The liquidation plan received overwhelming support among every class of creditors eligible to vote, a Nov. 29 company statement said. The plan's disclosure statement was approved Aug. 30.

The plan is supported by the official committee of unsecured creditors; members of the ad hoc group of senior bondholders; virtually all of the proponents of the nonconsolidation Chapter 11 plan; numerous holders of notes issued by Lehman Brothers Treasury Co. BV, which asserted substantial guarantee claims against Lehman Brothers Holdings; eight foreign administrators managing 87 foreign affiliates; and most other significant creditors.

Lehman, which owned investment banking, asset management, real estate and other assets, filed for bankruptcy on Sept. 15, 2008, after the collapse of a federal government-led effort to save it because of massive mortgage securities losses.

Debtor counsel is Alfredo R. PĂ©rez, Harvey Miller and Lori Fife of Weil, Gotshal & Manges LLP. Bryan Marsal of Alvarez & Marsal is chief restructuring officer. Barry W. Ridings of Lazard is Lehman's investment banker.
Tags: Alvarez & Marsal LLC | John Suckow | Lehman Brothers Holdings Inc.

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