Lehman Brothers Holdings, resolving a dispute that threatened to delay its exit from Chapter 11 bankruptcy protection, won consent for a $65 billion liquidation plan from derivatives creditors, including bondholders led by Paulson & Co. and CalPERS as well as Goldman Sachs Group.
The new plan gives more money to holders of guaranteed claims against the defunct firm’s derivatives and treasury units, including Goldman Sachs, Morgan Stanley and hedge fund Silver Point Capital, Lehman said Wednesday. The Paulson group, which includes the $225.6 billion California Public Employees’ Retirement System, Sacramento, would get less than previously proposed.
Lehman fought the Paulson group and the rival group of derivatives creditors for months over control of its liquidation plan. Lehman, which entered bankruptcy almost three years ago, has twice amended its proposals to pay claims in response to creditor challenges.
“Substantially all” of the proponents of the competing plans are backing the latest proposal after “intense negotiations” this month, Lehman said in filings Wednesday in U.S. Bankruptcy Court in New York.
Lehman CEO Bryan Marsal declined to comment, as did Goldman Sachs spokeswoman Andrea Raphael. Gerard Uzzi, a lawyer for the Paulson group, and Dennis Dunne, a lawyer for the creditors committee, didn’t immediately return calls seeking comment.
The compromise reached by Mr. Marsal, who has been selling assets to pay creditors, ends the threat of “protracted litigation” over the plan, the firm said.
The Goldman Sachs-Silver Point group said in April that Lehman’s earlier proposal was “highly unlikely” to succeed and contained “gifts” to bondholders that other creditors hadn’t approved.
CalPERS, which disclosed that it paid more than dollar-for-dollar for some of its Lehman bonds, responded that the Goldman Sachs group’s plan treated retirees “unfairly.” Harvey Miller, Lehman’s lead bankruptcy lawyer, said in a filing the Paulson-CalPERS plan “presents the parochial interests” of the group. Referring to the Goldman Sachs group, he said “the Big Banks assert extraordinarily large unresolved claims.”
The hedge fund headed by John Paulson paid as little as 9 cents on the dollar for some of its Lehman bonds, according to court papers.
Lehman said it will seek approval of the disclosure statement explaining the plan at an Aug. 30 hearing, allowing it to be sent to creditors for a vote. Objections to the disclosure statement are due by Aug. 11, and ballots must be in hand by Nov. 4.