Lehman Brothers Holdings on Tuesday won approval to send its liquidation plan to creditors for a vote as the failed investment bank works to wind down its three-year stay in Chapter 11 bankruptcy protection.
U.S. Bankruptcy Court Judge James Peck in Manhattan approved the description of the plan creditors will use to evaluate the proposal and said voting could begin.
Lehman creditors are getting their say after the investment bank filed for bankruptcy in September 2008. CEO Bryan Marsal has said he plans to raise as much as $65 billion to pay claims. Total claims will come to about $360 billion, Harvey Miller, Lehman’s bankruptcy attorney, said at Tuesday’s hearing.
Lehman’s success in getting to this stage in the case “borders on the miraculous,” Mr. Peck said. “Heroic efforts have achieved a very important transition point in the case.”
Creditors have until Nov. 4 to vote on the proposal. Lehman is scheduled to return to court in December to ask Mr. Peck to approve the plan, after which it would make distributions to creditors.
Lehman’s proposal is the result of a settlement it reached with two groups of creditors that opposed an earlier plan and were pushing their own ideas for distributing remaining assets.
One group was made up of senior bondholders, including the $228 billion California Public Employees’ Retirement System, Sacramento, and Paulson & Co. The second included Goldman Sachs Group and other banks. Those groups now back Lehman’s proposal, and Lehman says it has the support of creditors holding claims of more than $100 billion.
A group of creditors, including Germany’s central bank and Centerbridge Credit Advisors, filed objections, saying Lehman hadn’t disclosed sufficient information to evaluate the proposal. Lehman in response agreed to make added disclosures and said remaining objections should be overruled.