Lehman to make $127.6 million pension payment to settle PBGC lawsuit

By Caroline Salls

Pittsburgh, May 8 - Lehman Brothers Holdings, Inc. requested court approval of a retirement plan termination lawsuit settlement that provides for the payment of $127.6 million in pension plan benefits, according to a Thursday filing with the U.S. Bankruptcy Court for the Southern District of New York.

Specifically under the settlement, Lehman will pay $127.6 million plus interest to the Pension Benefit Guaranty Corp. to satisfy its claims against the company and a Lehman Brothers Holdings controlled group in connection with the Lehman Brothers Holdings Inc. Retirement Plan.

According to the motion, under Title IV of the Employee Retirement Income Security Act of 1974 (ERISA), the retirement plan sponsor and each member of its controlled group as of the termination date of the plan are liable to the PBGC for the amount of unfunded benefit liabilities.

In exchange for the $127.6 million payment, the PBGC has agreed to release its pension plan claims, including its claims for the unfunded plan benefit liabilities and premiums.

Mostly because of market events that occurred after Sept. 15, the company said the value of the assets of the plan declined significantly, resulting in the plan being underfunded relative to its total benefit liabilities.

Lehman said the settlement will allow it to move forward with disposing of controlled group assets to maximize value for their stakeholders.

In addition, Lehman said the settlement relieves the company from the distractions posed by a complex and time-consuming district court pension plan termination action filed by the PBGC in December.

If the PBGC was successful in its lawsuit, Lehman said the plan would be involuntarily terminated and the PBGC would assume the plan's assets.

If that happened, Lehman said the PBGC would have a $115.2 million claim for the amount of unfunded benefit liabilities and an $81.5 million claim for additional premiums.

A hearing is scheduled for June 3.

New York-based Lehman Brothers Holdings was the fourth-largest investment bank in the United States. The company filed for bankruptcy on Sept. 15, 2008. Its Chapter 11 case number is 08-13555.

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