Lehman Brothers Holdings Inc said it will take longer than expected to win approval of its bankruptcy plan and projects paying out $60.1 billion as it tries to settle differences with creditors owed six times that amount.

Harvey Miller, a lawyer for Lehman, told U.S. Bankruptcy Judge James Peck at a hearing in Manhattan on Thursday that there would be no court approval of a plan this quarter as previously hoped. Instead, he said, the company expects to have a plan in place well before the end of the year.

Lehman cannot start paying back creditors until after bankruptcy court has approved the plan, so the move means it may push those payments out even further.

The delay comes as Lehman has been navigating opposition from various creditors, including one group led by billionaire John Paulson that filed in December its own draft plan for Lehman to emerge from bankruptcy. This group believes Lehman's plan treats big bank creditors better than other creditors.

Miller said Lehman would file its amended reorganization plan -- which had been expected by the end of 2010 -- in seven to 10 days.

According to a regulatory filing, Lehman expects to have about $60.1 billion of assets, up from the $57.5 billion it estimated six months earlier, to distribute to creditors once it emerges from its now 28-month-old bankruptcy.

Lehman said the judge will likely let creditors pursue $322 billion of their estimated $369 billion of claims. It said a significant amount of claims are unresolved, including $40.3 billion tied to derivatives.

Lehman did not provide details about the amended plan, but said it would include compromises and some aspects of the creditors' suggestions regarding consolidating assets. It said it expects to further negotiate details of the plan with creditors after it has been filed.

Once the fourth-largest U.S. investment bank, Lehman filed for court protection on September 15, 2008, in by far the largest bankruptcy in U.S. history, after growing overexposed to real estate, mortgages and complex debt that plunged in value.

The bankruptcy filing is considered one of the main triggers of the global financial crisis.


Bryan Marsal, Lehman's chief executive and a principal at restructuring firm Alvarez & Marsal LLC, told Peck that improved market conditions for mergers and acquisitions give Lehman a golden opportunity to sell assets over the next six to 12 months.

Lehman can start repaying creditors once it emerges from bankruptcy. A company typically emerges shortly after it wins approval of a reorganization plan, but it is unclear how fast Lehman might emerge.

Under Lehman's plan, unsecured creditors could recover 10.4 cents to 44.2 cents on the dollar, general unsecured creditors of the holding company could recover 14.7 cents on the dollar and creditors of derivatives and commercial paper units could recover 21.9 cents to 44.2 cents on the dollar.

The company is separately suing Barclays Plc , JPMorgan Chase & Co and others to recover tens of billions of dollars of assets for distribution to creditors.

Barclays bought Lehman's main U.S. brokerage business shortly after the bankruptcy. Peck is expected to rule early this year on Lehman's claim that Barclays extracted an $11 billion windfall from this transaction.

During the hearing, Lehman did not address other issues that have come up recently, such as the December suit filed by New York prosecutors against accounting firm Ernst & Young in which it alleged the auditor stood by while Lehman used accounting gimmicks to mask its shaky finances.

The Securities and Exchange Commission is believed to be investigating certain Lehman executives for their role in these accounting transactions that made it look like the bank had less leverage than it did, but the SEC has not confirmed this.

The case is In re: Lehman Brothers Holdings Inc, U.S. Bankruptcy Court, Southern District of New York, No. 08-13555.

(Reporting by Caroline Humer and Jonathan Stempel in New York; editing by Dave Zimmerman, John Wallace and Andre Grenon)