(Adds details throughout.)
By Eric Morath And Joseph Checkler
Of DOW JONES DAILY BANKRUPTCY REVIEW
Affiliates of Goldman Sachs Group Inc. (GS), Silver Point
Capital LP and more than a dozen other Lehman Brothers Holdings
Inc. (LEHMQ) creditors filed a rival creditor-repayment plan Monday
that would greatly boost their recoveries from the failed
investment bank's Chapter 11 case.
Those creditors, which hold debt in Lehman's so-called operating
subsidiaries, offered a plan that would pay certain subsidiary
creditors up to 60.4 cents on the dollar while offering senior
Lehman bondholders a 16% recovery.
The group contends that money owed to the operating subsidiaries
is being used to give greater recoveries to creditors of the Lehman
parent. As part of its plan, the group wants a representative that
would act on its behalf to settle some of these intercompany
claims.
Calling Lehman's responsibility of handling claims between its
parent and subsidiaries "an inherent conflict of interest," the
group said creditors of the subsidiaries should be "adequately
represented in the claims administration process."
Under the plan Lehman presented in January, parent-company
unsecured creditors, including senior bondholders, would see a
21.4% recovery. Under Lehman's proposal, while operating-company
creditors generally would recover more than senior unsecured
creditors, the amount would be less than the operating-company
creditors say they are entitled to recover.
For example, unsecured creditors of the Lehman Brothers Special
Finance unit are slated to receive 26.1 cents on the dollar under
the plan filed Monday, compared to 22.3 cents on the dollar under
Lehman's plan, according to papers filed with the U.S. Bankruptcy
Court in Manhattan. Many of the Special Finance creditors would
actually see more than that under the plan, thanks to guarantees
they've received from the Lehman parent.
A spokeswoman said Lehman is reviewing the filing and didn't
have an immediate comment.
Other creditors joining in proposing the new plan include Morgan
Stanley & Co. (MS), Angelo, Gordon & Co. and Oaktree
Capital Management. The group represents creditors of other Lehman
subsidiaries including the company's commercial-paper unit, a Dutch
subsidiary and an entity called Lehman International Europe.
The group, which calls itself the Non-Consolidation Plan
Proponents, is the third party to file a plan for the distribution
of Lehman's assets. A group including Paulson & Co.
representing about $20 billion in Lehman claims filed its own
proposal late last year that pushes for a 24% recovery for senior
unsecured creditors at the expense of subsidiary creditors. One of
the Paulson group's main problems with the Lehman plan was the
possibility of double recovery, or "double dip" for some creditors,
a component of both the Lehman plan and the new rival plan filed
Monday.
Earlier this month, U.S. Bankruptcy Judge James Peck said all
proposed Lehman plans could start on the same timetable. He is
slated to review the plans at a June 28 hearing to determine if
they can be sent to creditors for a vote. Lehman is reserving the
right to ask for its plan to be voted on first.
Lehman's collapse in September 2008 marked the largest U.S.
bankruptcy case ever filed. Since then, a team of hundreds of
bankruptcy professionals under the direction of restructuring firm
Alvarez & Marsal has managed Lehman's assets--which include
real-estate holdings, corporate debt and derivatives--for the
benefit of creditors.
Lehman estimated earlier this year that it will likely have $322
billion in allowed claims against the estate, with $272 billion
from the parent company and about $50 billion from its various
subsidiaries. The bank increased creditors' expected net recovery
by $2.6 billion from the $57.5 billion it estimated in a September
court presentation.
(Dow Jones Daily Bankruptcy Review covers news about distressed
companies and those under bankruptcy protection.)
-By Eric Morath; Dow Jones Daily Bankruptcy Review;
202-862-9279; eric.morath@dowjones.com
-By Joseph Checkler; Dow Jones Daily Bankruptcy Review;
212-416-2152; joseph.checkler@dowjones.com