Lehman operating company creditors consider filing competing plan

By Caroline Salls

Pittsburgh, April 7 - A group of Lehman Brothers Holdings Inc.'s operating company creditors reserved their right to file another competing plan for Lehman's Chapter 11 bankruptcy case, according to a Wednesday filing with the U.S. Bankruptcy Court for the Southern District of New York.

The operating company creditors' filing came from attorneys of Deutsche Bank AG, Morgan Stanley Capital Services Inc. and Morgan Stanley & Co. International plc, D.E. Shaw Composite Portfolios LLC, D.E. Shaw Oculus Portfolios, LLC, Goldman Sachs Bank USA, Goldman Sachs International, Crédit Agricole CIB, Credit Suisse International, Royal Bank of Scotland plc, Oaktree Capital Management, LP as agent on behalf of funds it advises and Silver Point Capital, LP on behalf of its affiliated investment funds.

The creditors said they have been in good faith discussions with the company and its official committee of unsecured creditors concerning potential revisions to Lehman's plan.

In particular, the operating company creditors said they have expressed their views regarding Lehman's "proposed reallocation of substantial value from creditors of operating companies to creditors of the holding company through the settlement of unfounded arguments for substantive consolidation, impermissible class gifts, unfairly inflated intercompany claims and a conflict-ridden intercompany claims resolution process."

Lehman Brothers Treasury BV noteholders said in a separate filing Wednesday that the operating company creditors are "seriously considering filing a third plan" that would be based on non-consolidation and the recognition of each of the debtors and their foreign affiliates as separate legal entities.

The noteholders said this would be accomplished without any plan adjustments or other extra consideration flowing to particular holding company creditors "based on an unsubstantiated risk that this court might order substantive consolidation of certain debtor and/or foreign non-debtor estates."

As previously reported, Lehman and an informal group of Lehman Brothers creditors have filed competing plans to date.

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.

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