CalPERS and hedge fund Paulson & Co. filed an objection to Lehman Brothers Holdings Inc.’s plan to pay creditors, saying it creates conflict among creditors who believe they are being treated unfairly.
The creditor group, which has expanded its members to 12, holds $15.5 billion in claims against the defunct firm, according to the objection filed Tuesday in U.S. Bankruptcy Court in New York. Lehman, which has been trying to trim claims of more than $1 trillion originally, is offering creditors 14.7 cents to 44.2 cents on the dollar, it said on April 14.
The group, led by the $203.5 billion California Public Employees’ Retirement System, Sacramento, and hedge funds, said it wants the bankrupt investment bank to boost some creditors’ payments and lower others, so all are compensated equitably. The current plan fosters conflicts among creditors, they said.
“The plan establishes a ‘pot’ of assets for distribution and pits creditors of the various estates against each other,” they said in the filing.
San Mateo County, Calif., a member of the group, invested $155 million in Lehman debt, which was intended to help fund services, county officials said.
“This group sort of coalesced as a joint effort to try to see if we could essentially make the argument for a more fair distribution of the assets when the bankruptcy finally winds up on this thing,” said Michael Murphy, San Mateo’s county counsel.
Creditors working with Paulson include King Street Capital Management, Fortress Investment Group and WAMCO. They said last week in a court filing they had 11 members after adding nine members to their so-called ad hoc group, which hasn’t been recognized by the bankruptcy judge as an official committee. They now number 12, according to Tuesday’s filing.
The failed investment bank, which filed the largest bankruptcy in history in 2008 with debt of $613 billion, has said it might spend another five years selling assets to pay creditors.