The administrators of Lehman Brother’s European business have struck upon a new idea to get that firm’s prime brokerage clients their money back. But in order to do so, it needs a little help from those hedge funds.
Steven Pearson and Tony Lomas, the PricewaterhouseCoopers partners overseeing the bankrupt investment bank’s operations in London, will roll out a plan today that would have creditors agree to take their claims out of the British courts, which has thus far refused to allow PwC to expedite the return of some $16 billion in prime brokerage assets. Under the proposal, hedge funds would agree in writing to be bound by the plan, allowing PwC to distribute assets directly to creditors, The Wall Street Journal reports.
As many as 450 hedge funds have had assets at the Lehman prime brokerage frozen due to the firm’s bankruptcy proceedings in the U.K. Pearson told the Journal that he hopes some 90% of those creditors will accept the unusual plan, which would cut down on the risk of those creditors being sued later by creditors who refuse to participate in the plan.
An earlier plan to begin distributing assets by the beginning of next year was rejected by the British courts, although Pearson and Lomas have appealed that decision.
Several hedge funds served on Lehman Brothers International Europe’s creditors committee, including GLG Partners, Oceanwood Capital Management and Ramius. The new PwC plans has already won the conditional support of some of those creditors.
“A collective solution likely will lead to the fastest resolution,” GLG lawyer Alejandro San Miguel told the Journal. Owen Littman, Ramius’ general counsel, agreed.
“The situation is so complex, if we don’t have something like this, lots of clients will have their assets stuck… for a long, long time.”