Thousands of creditors owed up to $22 billion by bankrupt U.S. investment bank Lehman Brothers will be offered earlier cash payments if they are willing to take a cut in their claim valuations.
PricewaterhouseCoopers (PwC), which is in charge of the collapsed bank's main European operations, said on Wednesday the majority of claims should be agreed by the end of the year and payouts made in 2011.
The traditional case-by-case approach would take years, but the alternative proposal is aiming for a rapid determination of creditor claims that is fair, market acceptable and pragmatic, said Steven Pearson, joint administrator and partner at PwC. The so-called consensual approach would value the claims on over 6,000 unsecured creditors of Lehman Brothers International Europe (LBIE).
The consensual approach is an innovative mechanism which will enable the claims to be determined in an expeditious manner, resulting in significant time and cost savings to both unsecured creditors and LBIE, Pearson said in a statement.
The timing at which cash distributions can be made will be accelerated materially.
The dramatic collapse of New York-based Lehman at the height of the financial crisis in September 2008 trapped the assets of thousands of clients around the world, including banks, insurers and hedge funds. Administrators have since been assessing the claims of creditors.
European clients have had their claims tied up in legal proceedings during a highly complex process.
PwC's proposal needs the overwhelming majority of financial trading counterparties to support the process, Pearson said.
Outstanding claims from European creditors are estimated to be between $18 billion and $22 billion. The administrators currently hold net cash of approximately $7.3 billion.
LBIE would determine the claim value of each financial trading creditor using a standard set of data and valuation methods, universally applied to all relevant unsecured creditors.
PwC said it would start talks with financial trading counterparties with regard to their claims. If it gets support, it plans to hold meetings in London and New York and launch the offer in the autumn.
(Editing by Will Waterman)