Lehman eyes fourth-quarter plan revision, first-quarter confirmation

By Caroline Salls

Pittsburgh, Sept. 22 - Lehman Brothers Holdings Inc. expects to file a revised plan of reorganization in the fourth quarter to deal with what's left of the almost $1.2 trillion of claims filed in its bankruptcy case as of the November 2009 final claims bar date, according to a "State of the Estate" presentation filed Wednesday with the Securities and Exchange Commission.

Lehman said it is optimistic that it can secure confirmation of a plan by the end of the first quarter of 2011.

As previously reported, Lehman filed a proposed plan in March. In the presentation, the company said "creditor differences are narrowing," and it has made significant progress in reducing the filed claims over the last six months.

In addition, Lehman said market liquidity continues to improve, resulting in more buyers or refinancing sources, and an aggressive recovery management strategy continues to enhance ultimate recovery values.

The company reported that each of its asset teams has projected recoveries to higher levels than included in its last report.

The company said it worked with the Federal Deposit Insurance Corp. to restructure Lehman's bank platforms for optimum liquidation and sale results; exited 85%, or $26 billion, of unfunded revolver liability and $3.3 billion of private equity/principal investments unfunded capital commitments at minimal cost; and reached a collateral disposition agreement with JPMorgan in March that has allowed administration and potential enhancement of asset values.

According to the presentation, $860 billion of claims were filed against Lehman Brothers Holdings by the final bar date, and $302 billion were filed against its subsidiaries.

Lehman said clear errors and duplicate claims have been disallowed, and a more realistic range of holding company unsecured claims is estimated at $250 billion to $350 billion.

The company said its key priority during the last six months has been focusing on foreign affiliate and foreign third-party guarantee claims and related intercompany claims.

Lehman said its estimate of gross derivatives recovery proceeds has been increased by $850 million from its April forecast, and it expects to collect $15 billion from derivatives receivables from all operations. Roughly $11 billion had been collected through June 30.

Speaking on private equity/principal investments, Lehman said it collected $681 million in the first half of 2010, with $950 million forecasted for the full year.

The company said the value of its remaining portfolio has increased about 2% since April.

Also, Lehman said gross real estate recovery proceeds have increased by more than $100 million since April, and significant unrecognized upside value exists in some of these assets if market conditions continue to improve.

As of June 30, Lehman had $21.13 billion in total cash, cash investments and cash collateral.

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 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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