Creditors set for Lehman Bros payout

Michael Bow
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A HOST of lenders to the European arm of collapsed bank Lehman Brothers were given a boost today after administrators said they expected to pay all their money back in full, ending years of confusion over the payout.

A variety of banks and fund managers will get a 100 per cent refund within the next two years after joint administrator PwC said a rapid acceleration of claim settlements since October had increased the odds of paying out to unsecured creditors. Tony Lomas, lead administrator called the move a “significant milestone” in the winding down of the defunct bank.

Lehman’s demise in 2008 sent shockwaves around the world and kicked off a financial panic.

More than £12bn worth of claims have been submitted by unsecured creditors since then, and last year PwC paid a distribution of 25.2 per cent of funds back. It expects to pay two more this year, it said.

Around half of unsecured creditor claims are now held by distressed debt investment funds, which snapped up the claims from primary creditors such as hedge funds and investment banks.

On top of the full pay back of principal, creditors could also be in line for statutory interest payments of eight per cent a year which have been accruing since 2008.

A US judge is set to decide later this year if shareholders – who are owed around £1.7bn – or unsecured creditors should be higher in the queue to get any surplus money.

Moves to pay accrued interest from the past four-and-a-half years would wipe out any money available for shareholders.