Lehman creditor group: plan pits estate creditors against each other

By Caroline Salls

Pittsburgh, June 29 - An informal group of Lehman Brothers Holdings Inc. creditors said the company's proposed plan of reorganization pits creditors of Lehman's various estates against each other in connection with the distribution of assets, according to a preliminary objection filed Tuesday with the U.S. Bankruptcy Court for the Southern District of New York.

The creditor group, which holds $15.5 billion of claims against the Lehman debtors, said the plan establishes a "pot of assets" for distribution.

"The plan's proposed allocation of value within the individual debtor estates is seriously flawed, particularly with respect to its proposed treatment of interstate conflicts," the creditors said in the objection.

"At its core, the plan highlights what the ad hoc Lehman group believes will be a key issue at confirmation - the allocation of tens of billions of dollars of distributable value between the twenty-three debtor estates for further distribution to creditors of those estates."

Currently, the creditors said the plan includes a series of settlements proposed by the company in an attempt to harmonize two potential opposing structures for allocating that value.

"Despite the recognition that the inter-debtor issues are the subject of legitimate debate, the debtors seek to justify their decision to propose settlements of all inter-debtor issues, ostensibly on the basis that litigation could take years to resolve and based on generically described analyses that the debtors claim to have performed," the creditors said in the objection.

"Based on current disclosures, the ad hoc Lehman group does not believe that the plan reflects a fair assessment of the risks and rewards attendant to an active litigation of inter-debtor issues."

Specifically, the creditors said there does not appear to be any risk of litigation regarding various foreign and domestic affiliates.

Additionally, the creditors said the plan does not adequately address intercompany claims that were filed in connection with undisclosed board resolutions and more than $200 billion in intercompany agreements.

"While the debtors seek to cap the allowed amount of these claims at $21.2 billion, the ad hoc Lehman group believes that these claims are subject to readily available defenses," the creditors said.

The creditor group also asked the court to schedule a status conference for July 14 to address procedures for objections and creditor participation in the prosecution of the plan and related disclosure statement.

The creditors said they are not asking the court to address the merits of substantive consolidation or allowance of the guaranty or board resolution claims through the preliminary objections, but rather to provide a mechanism for starting a lengthy "pre-confirmation process of education and preparation."

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. Its Chapter 11 case number is 08-13555.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.