Investor group opposes Lehman plan

Published: June 6 2010 23:05 | Last updated: June 6 2010 23:05

A group of Dutch retail investors who own bonds sold by a unit of Lehman Brothers Holdings are organising to oppose the bankrupt bank’s proposal for pay-outs to its creditors.

The group believes that European creditors who own bonds issued by Lehman Brothers Treasury, an Amsterdam-based unit, are being treated unfairly and they intend to dispute Lehman’s plan in US proceedings this month, said Gerhard Zeilmaker, a bondholder and retired senior executive at ABN Amro.
Lawyers at Houthoff Buruma were named trustees for the Dutch unit.

“LBHI’s proposed creditor treatment plan favours US creditors, large financial institutions, over European individual investors,” the Dutch group said on Sunday.

As part of its bankruptcy proceedings, Lehman this year drafted a plan that lays out the estimated pay-outs to the various creditors at the holding company and subsidiaries. The bondholder group argues that the plan unfairly cuts their claim by 50 per cent, to the benefit of US creditors. Lehman was not immediately available for comment.

The Dutch group represents about 100 investors holding $650m-$1bn in face value of bonds, Mr Zeilmaker said.

Lehman Brothers Treasury raised more than $34bn from about 50,000 individual investors across Europe, the group said. It is not working directly with hedge funds, which have bought many of the bonds since the bankruptcy.

The Dutch investor group said Derk Jan Eppink, Belgian member of the European Parliament, supported the campaign and had brought it to the European Commission’s attention.

The opposition of European bondholders is the latest twist in Lehman’s complex bankruptcy.

Retail investors around the world suffered considerable losses when Lehman failed. Soon after its bankruptcy, angry Asian retail investors protested over losses in structured products arranged by Lehman, while the plan the Dutch investors dispute foresees some other bondholders with claims to Lehman Brothers Holdings – the parent company – receiving just 15 per cent of their claims or less.

In the nearly two years since its bankruptcy filing, Lehman has launched several lawsuits to boost the pool available to pay back its myriad creditors. It is trying to recover $11bn on the sale of its North American investment bank to Barclays, as well as $8.6bn seized by JPMorgan as collateral in the days leading up to Lehman’s collapse.

Last week Lehman’s former executives and Ernst & Young, the auditor, asked a judge to dismiss a class action suit that alleges offering documents for Lehman securities contained “untrue statements and omitted materials facts” related to the use of “Repo 105”, described as an “accounting gimmick” by Lehman’s court-appointed examiner.

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