One-time financial powerhouse Lehman Brothers said it emerged from bankruptcy on Tuesday and is now a liquidating company whose main business in the coming years will be paying back its creditors and investors.
Lehman, which exited bankruptcy just after midnight early on Tuesday, according to court documents, will start distributing about $65 billion (41 billion pounds) to creditors on April 17, it said in a statement.
That first group of payments to creditors, many of whom lost money in its collapse 3-1/2 years ago, will be at least $10 billion, Lehman said previously.
The move is a legal milestone, but does not indicate the immediate end of Lehman Brothers. The company will live on for some time as a sliver of its former self to sell assets, continuing to operate in its midtown Manhattan headquarters.
What our people were doing yesterday and what they are doing today has not changed, said Steven Cohn, an employee of restructuring firm Alvarez & Marsal who has worked as Lehman's treasurer since the bankruptcy began.
Now, however, the company has freedom to operate more like any other company outside of bankruptcy, he said.
At the peak of its bankrupt operations, about 735 people were working at Lehman, compared with about 433 in January of this year. That's down from the 25,000 Lehman Brothers once employed.
Lehman's bankruptcy exit comes at a mixed time for the global economy. Some signs of an economic rebound, such as lower unemployment in the United States, come against a backdrop of a massive Greek debt deal and uncertain economic outlooks abroad.
Still, it is far from the economic crisis that was engulfing the world's economies in 2008 when Lehman Brothers Holdings Inc
Lehman's collapse rocked the foundations of the global financial markets and contributed to the unfolding of the Great Recession.
Exactly 1,268 days later, the legal end to the case enables Lehman to start paying back the creditors, who together had asserted more than $300 billion in claims.
The company, whose assets include $35 billion in cash, is due to make a second payment in September and then will continue to make periodic distributions in the future as it sells off its remaining holdings.
Among the most notable of those holdings is the Archstone apartment real estate company. Lehman owns almost half of the company and is trying to buy the other half in order to gain the control it says it needs to maximize its investment.
The bankruptcy's most public negotiations focused on its reorganization plan, as it worked to get investor groups including Wall Street firms like Goldman Sachs Group Inc
Bankruptcy Judge James Peck approved their creditor payback plan in December. Since then, Lehman has continued to tie up its loose ends: selling more assets, litigating more claims and settling disputes with affiliates and counterparties.
Now that it is out of bankruptcy, Lehman no longer needs to ask court permission for every asset sale or corporate decision. And the company will continue to liquidate the remaining expected $30 billion worth of assets under a new board of directors.
But while bankruptcy is legally behind Lehman, the court process will continue for an uncertain number of years as various claims and suits work their way through the system. As of January, it had spent more than $1.58 billion on professional fees, including lawyers and advisers.
In addition, a separate proceeding continues for brokerage customers where the U.S. government is gathering funds to pay them back.
The case is In re Lehman Brothers Holdings Inc, U.S. Bankruptcy Court, Southern District of New York, No. 08-13555.
(Additional reporting By Nick Brown and Jon Stempel; Editing by Gerald E. McCormick)