Lehman Brothers Holdings Inc. expects to have $40.5 billion in
cash on its books in the coming years, a $6 billion increase from
an earlier estimate, buoyed by gains from litigation and its
real-estate holdings and derivatives positions, along with
recoveries from settlements with foreign affiliates.
In a filing Wednesday night in U.S. Bankruptcy Court in New
York, Lehman said it is boosting its cash estimate based on
including $1.1 billion it collected last year in settlements with
J.P. Morgan Chase & Co. (JPM) and Bank of America Corp.
(BAC).
Another chunk of cash, some $2.4 billion, is expected to come
from gains in Lehman's real-estate holdings and derivative
positions. Those gains, however, will be partially offset by losses
on Lehman's corporate and residential loan portfolio and private
equity holdings.
Lehman's last estimate of how much cash it would eventually have
in its coffers dates back to last August. The failed investment
bank said it is updating that estimate based on recoveries from a
number of legal settlement and intercompany claims.
The biggest portion of new cash expected to flow into Lehman's
coffers will come from settlements with the failed investment
bank's "non-controlled" foreign affiliates. Lehman increased its
estimate by $3.5 billion to $7.6 billion, from $4.2 billion a year
ago.
Lehman's September 2008 Chapter 11 filing triggered foreign
bankruptcy proceedings for more than 80 of the bank's far-flung
affiliates. The holding company has reached settlements on
intercompany claims with virtually all of its foreign affiliates,
including those in the U.K., Japan and Hong Kong.
But the bank has yet to reach a deal with several holdouts,
among them the administrators winding down its former
Switzerland-based derivatives unit and its Australian
subsidiary.
Lehman's holding company also has yet to reach a final deal on
intercompany claims with the trustee winding down its former U.S.
brokerage unit. However, the two sides have an agreement "in
principle," according to court papers.
Lehman Brothers officially emerged from Chapter 11 bankruptcy
protection in March and began paying back creditors the following
month. Although Lehman is out of bankruptcy protection, its case is
far from over and will likely continue for years as a bankruptcy
team liquidates Lehman's assets.
Exactly when that end will be is unknown given Lehman's ongoing
litigation with former affiliates and derivative counterparties.
Lehman said it is increasing its estimate of net cash through its
"estimated end of activities."
Lehman, once the nation's fourth-largest investment bank,
collapsed in the largest bankruptcy in history. Since then, a team
of bankruptcy professionals under the direction of Alvarez &
Marsal Inc. has managed Lehman's assets. Lehman says it expects to
pay those employees some $751 million in compensation and benefits
from 2012 through sometime beyond 2015. It expects to pay out
another $767 million in professional fees for the same time
period.
In April, Lehman made its initial distribution to creditors,
paying out $22.5 billion. The next wave of distributions in the
company's roughly $65 billion creditor-payback plan is set for
later this year.
(Dow Jones Daily Bankruptcy Review covers news about distressed
companies and those under bankruptcy protection. Go to
http://dbr.dowjones.com)
Write to Patrick Fitzgerald at patrick.fitzgerald@dowjones.com.
Follow him on Twitter @WSJBankruptcy
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