Lehman-Freddie Mac Deal Frees Billions For Creditors

Feb 20 2014 | 9:15am ET

Lehman Brothers' settlement with Freddie Mac is good news for the bankrupt bank's hedge-fund creditors.

A federal judge yesterday approved a $767 million payout to Freddie Mac. That is much less than the bank was forced to set aside two years ago, giving the Lehman estate more money to distribute to other creditors.

Former U.S. Bankruptcy Judge James Peck had ordered Lehman to keep $5 billion aside to pay Fannie Mae and Freddie Mac. But the combined payout to the two government-backed mortgage giants is just over $1.3 billion.

In addition, Fannie and Freddie will turn over information that will allow Lehman to sue mortgage originators, potentially increasing the pot for creditors even further. Currently, Lehman has almost $13 billion to pay unresolved claims.

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