The team winding down Lehman Brothers Holdings Inc. said Thursday it would be paying out $3.8 billion to creditors next week, more than eight years after the investment bank's collapse triggered the financial crisis.
The distribution, the 11th since the investment bank failed in 2008, will bring the total payout in the firm's bankruptcy to more than $113.6 billion. The bulk of the cash---$83.6 billion---has gone to pay so-called third-party, or non-Lehman claims.
Lehman said Thursday in a filing in U.S. Bankruptcy Court in New York that its senior unsecured creditors, Lehman bondholders who were estimated to receive about 21 cents on the dollar when the bank's bankruptcy plan went into effect in early 2012, will have recovered more than 40 cents on the dollar after the next distribution is completed.
The chapter 11 payment plan for Lehman treats similarly situated creditors of its subsidiaries better than those of the parent. For example, general unsecured creditors of Lehman's Special Finance unit, the heart of the failed investment bank's derivatives business, have so far recovered more than 37 cents on the dollar, though they are limited to how much they can claim.
General unsecured creditors of Lehman's commodities unit, meanwhile, will have received nearly 79 cents on the dollar following the latest distribution.
The boost in recoveries has come from gains in the estate's real estate, derivatives and private-equity investments, Lehman has said.
Among Lehman's remaining holdings is its stake in the Formula One racing circuit, which John Malone's Liberty Media Corp. has agreed to buy for $4.4 billion. The circuit, with races scattered across the globe, has long been a cash cow for Lehman and its other owners. Lehman's ownership stake is worth about $530 million.
Lehman acquired its take in Formula One after German mogul Leo Kirch's media empire collapsed in 2002. The investment bank sold this stake to majority owner CVC Capital Partners but then reinvested in the circuit as part of the private-equity firm's deal to acquire the sport.
A Lehman spokeswoman declined to comment on the Formula One sale.
For Lehman's unsecured creditors, among them a number of hedge funds such as Paulson & Co. that spent the years after Lehman's collapse buying up bankruptcy claims at steep discounts, the increased recoveries are adding hundreds of millions in profits already booked.
Lehman, once the nation's fourth-largest investment bank, collapsed into the largest bankruptcy ever in September 2008 and its U.S. brokerage business was quickly sold off to Barclays PLC.
After the bank failed, some creditors bailed out, not wanting to wait for their money or to take a chance they wouldn't get paid at all. Hedge funds were willing buyers of their claims at steep discounts, betting they would gain in value after the initial panic subsided.
That bet has become fruitful. Since the bankruptcy, Lehman has consistently increased estimates of how much creditors would get back, helping hedge-fund managers such as Paulson and Paul Singer's Elliott Management rake in big profits.
A team of bankruptcy professionals under the direction of turnaround firm Alvarez & Marsal managed the New York holding company's assets until Lehman's exit from bankruptcy in 2012, when a reorganized company emerged, overseen by a new board.
In all, Lehman still has about $5.7 billion in remaining investments to unwind and more money to pay creditors. The bank, which is expected to exist in some form for several more years, said that checks to creditors will go out on Oct. 6.
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