Linklaters acts as Lehman Brothers edges closer to mass pay-out

Linklaters has helped secure a crucial agreement in the Lehman Brothers administration that looks set to pave the way for its assets to be liquidated.

A team led jointly by global head of restructuring and insolvency Tony Bugg and partner David Ereira advised PricewaterhouseCoopers (PwC) joint administrators Mike Jervis, Tony Lomas, Steven Pearson and Dan Schwarzmann on what the firm has descirbed as a “critical milestone”.

The Linklaters team also includes partners Jim Warnot and Paul Hessler and senior US associate Aaron Javian in New York.

A team from US firm Davis Polk & Wardwell advised the administrators on US law, with partners Tim Graulich and Elliot Moskowitz, as well as counsels Erika White, James Millerman and Michael Russano, acting.

Although the agreement in principle still needs approval from US bankruptcy judge James Peck and an order of the English High Court, it will resolve all claims between Lehman Brothers Inc (LBI) and Lehman Brothers International (Europe) (LBIE), which total $38bn. This will mean the assets can be divided up by the trustee and joint administrators and given to customers and creditors.

Lehman’s customers will receive £7.5bn of property and $600m in cash. The Lehman estate will receive a cash customer distribution of half a billion US dollars and a general claim of a further $4bn, with LBI dropping its claims against LBIE.

PwC is now preparing arrangements for the distribution of these assets to LBIE’s customers.

Ereira said: “This agreement shows that even the most complex and enormous inter-affiliate disputes can be resolved. This is the single largest step in the resolution of the LBIE administration to date. It’s the culmination of over four years of continuous effort and work by the administrators and the Linklaters team.

“It will bring to an end the wait for the return of customer assets held within the US process and assist in the distribution to LBIE’s creditors.”

The Lawyer has previously reported that Linklaters has earned the majority of the £60.5m paid to barristers and solicitors in the UK for the administration in the 12 months following the bank’s collapse in September 2008.

In total, law firms and consultants have earned more than £1bn from the bank’s collapse, making it the largest bankruptcy in history.

Among the biggest billers have been Weil Gotshal & Manges, led by partner Harvey Miller in the US for Lehman, and Milbank, led by co-head of restructuring Paul Aronzon, acting for the creditors committee (19 March 2012).