A U.S. bankruptcy court judge has approved a set of settlements that will clear the way for the remnants of Lehman Brothers to repay billions in customer claims in full.
Lehman's bankruptcy in September of 2008 was the largest ever in U.S. history; it listed $639 billion in assets at the time. Its demise marked the beginning of the global financial crisis and was a major catalyst of the financial meltdown.
Lehman's individual retail customers were repaid in the first few days of the brokerage's liquidation. However, it took several years of negotiations before Lehman Brothers Inc., its holding company Lehman Brothers Holdings Inc., and its European arm, Lehman Brothers International, could agree on how claims for larger customers of each unit, such as hedge funds or institutional investors, would be paid.
The three parts reached an agreement last year and submitted it to the U.S. bankruptcy court in New York in February. Judge James Peck approved the agreements Tuesday, settling the disputes among the entities.
The trustee for the Lehman Brothers liquidation, James Giddens, called the decision a milestone for Lehman's customers.
The agreement provides Lehman Brothers Holdings $2.3 billion for customer claims and $14 billion for general unsecured claims. The European unit will receive $9 billion for customer claims and $4 billion for unsecured claims.
The customer payments are expected to begin as soon as court orders are final. The European settlement still needs approval from a British court. Holders of unsecured claims will be repaid based on whatever is left following the completion of customer claims.
Representatives for the holding company and European unit could not be reached immediately for comment.