Lehman: “In Principle Bermuda Settlement”
Lehman Brothers Holdings Inc. says it has reached an agreement in principle resolving the claims of Lehman Re Ltd., one of its affiliates in Bermuda, which is subject to documentation and various approvals, including approval of a New York Bankruptcy Court as part of the overall debtors’ plan confirmation and of a Bermuda court.
There is no assurance at this time that this agreement will be consummated, said Lehman Brothers in a statement, and no details about the agreement in principle are available at this time.
Lehman filed for Chapter 11 bankruptcy protection on September 15, 2008. The bankruptcy of Lehman Brothers remains the largest bankruptcy filing in US history with Lehman holding over $600 billion in assets. The company and its affiliated debtors filed a supplement to their Joint Chapter 11 Plan with the US Bankruptcy Court for the Southern District of New York this week, incorporating nine major settlement agreements, including six agreements with 67 of their significant, non-controlled affiliates, and three agreements with large third-party creditors. The parties to these settlement agreements and other major creditors that in the aggregate assert more than $160 billion in claims have all executed plan support agreements. The plan supplement also includes an updated list of these creditors, totaling more than 150 to date, that have executed agreements to support the debtors’ plan.
The debtors’ filing today disclosed the terms of settlements with the following affiliates: Lehman Brothers International [Europe] and 56 other PwC controlled UK affiliates, Lehman Luxembourg, Lehman Japan and Lehman Brothers Securities N.V. (Curacao). To date, the Debtors have reached settlements with substantially all of their affiliates, including those in Germany, Hong Kong, the Netherlands and Singapore. The Debtors’ filing also disclosed the terms of settlements with some of the Debtors’ most significant third-party creditors, including the Bundesverband Deutscher Banken and the Deutsche Bundesbank.
Lehman CEO Bryan Marsal said: “The rapidly growing level of support for our plan demonstrates that our creditors understand the logic of the economic compromise we have proposed. We met with our creditors frequently, listened and responded to their concerns, and structured the plan accordingly. Those creditors who signed PSAs clearly recognize that this plan provides the best path toward expeditious distributions to creditors.”
Weil attorney Lori Fife, Lehman’s lead bankruptcy attorney, said: “The significance of the settlements disclosed today should not be underestimated. Lehman has passed another important milestone on its road to a largely consensual confirmation of its plan.”
The plan voting deadline is November 4, 2011. Implementation of the plan is subject to the provisions of the Bankruptcy Code, acceptance by the requisite majorities of impaired creditors, and approval of the US Bankruptcy Court. A confirmation hearing on the plan has been scheduled for December 6, 2011 before Judge James M. Peck.
Earlier this year Lehman was sued for an “abuse” of repurchase agreements that effectively “looted” $450 million from its Bermuda reinsurance unit when the assets were pledged to the unit’s biggest lender.
Lehman took the cash in 2008 when it was increasingly short of funds, said Pulsar Re Ltd., a Bermuda-based reinsurance company that is claiming the money from defunct Lehman Re in Bermuda, in a lawsuit. Lehman saddled the unit with illiquid assets “worth far less than the inflated market values assigned to them by Lehman personnel,” Pulsar said in the complaint filed yesterday in US Bankruptcy Court in New York.
“Lehman’s abuse of repurchase agreements throughout 2008 to create the false appearance of financial health was rampant,” Pulsar said, citing a report into Lehman’s bankruptcy by examiner Anton Valukas. Under orders from former Chief Executive Officer Richard Fuld, Lehman tried to disguise its leverage by resorting to short term repos secured by “inflated” or improperly valued collateral, it said.
Pulsar’s lawsuit is one of several that makes use of the Valukas report and other investigations into the largest bankruptcy in US history. Most of the lawsuits seek money from former Lehman executives rather than bankrupt Lehman.
