Lehman Brothers International administrators assess consensual approach for determining claims

By Jennifer Lanning Drey

Portland, Ore., June 16 - Lehman Brothers International (Europe)'s joint administrators are exploring an alternative consensual approach for determining claims, which they believe could materially accelerate the resolution of LBIE's estate, according to a news release.

The administrators are working with the unsecured creditors resolution working group, which includes members of the creditors committee, to explore the consensual approach.

While the exact scope of the consensual approach is still being explored, the administrators said they currently expect it will focus on the financial trading creditors.

The administrators said they are committed to implementing a procedure for the determination of the financial trading creditor claims that is broadly acceptable to the market.

They also noted that the feasibility of the consensual approach is entirely dependent on the willingness of an overwhelming majority to support the process.

Details of consensual approach

Under the consensual approach:

• LBIE will offer to agree to each participating financial trading creditor's claim by substituting its value with a value determined by LBIE using its own methodology, known as the LBIE determination;

• The LBIE determination will be established using a comprehensive set of processes, data sources and valuation models, all subject to review and universally applied to the unsecured creditors falling within the scope of the consensual approach;

• LBIE's offer will be conditional on the acceptance of the LBIE determination by an overwhelming majority of the financial trading creditors. The administrators will continue to work to define the pre-requisite threshold level of support required to implement the approach;

• If the required level of acceptance is met, the claims of the participating financial trading creditors will be admitted for dividend in the administration of LBIE at the LBIE determination; and

• The joint administrators are also exploring whether it might be possible to provide participating financial trading creditors and other unsecured creditors with admitted claims with an option of receiving a one-off cash payment in full satisfaction of their claim.

Next steps

With the implementation of the consensual approach dependent on the willingness of an overwhelming majority, the administrators plan to engage a number of financial trading creditors and seek their support for the consensual approach.

The administrators hope to provide feedback on the discussions to the unsecured creditors resolutions working group in the coming weeks.

If the administrators' meetings with the financial trading creditors lead the unsecured creditors resolution working group to believe the consensual approach could be viable, the administrators expect to host meetings in London and New York to outline the approach in more detail.

The administrators said they envision launching the consensual approach and issuing the LBIE determination notices before the end of the year.

They are targeting making a first cash distribution to unsecured creditors as early as possible in 2010, the release said.

Expected benefits

The administrators said benefits of the consensual approach for unsecured creditors include a significant reduction in the administrative burden for unsecured creditors, a material reduction in the costs of determining unsecured creditors' claims, an acceleration to the timing of a cash dividend from LBIE and the potential option of receiving a full and final payment in settlement of an admitted claim.

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

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