Lehman Aims to Impede CalPERS' Rival Liquidation Plan

(April 11, 2011) — Lehman Brothers Holdings is looking to delay a court hearing for a rival liquidation plan composed by bondholders including hedge fund Paulson & Co and the California Public Employees’ Retirement System (CalPERS), Reuters is reporting.

The plans center on how much various creditors would be paid.

Lehman, which filed for bankruptcy with a debt of $613 billion, said time and money would be saved if creditors approve the defunct firm’s $61 billion plan. “If the debtors’ plan is confirmed, it will relieve the need for further proceedings and save considerable time and expense,” Lehman said in a filing in US Bankruptcy Court in Manhattan. The judge has “discretion” to give Lehman first chance at getting a plan confirmed by the judge, the filing said.

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

Earlier this year, the largest US public pension fund sued former Lehman executives and underwriters, alleging that they concealed Lehman’s exposure to subprime loans.

CalPERS said in a complaint filed in San Francisco federal court that the executives of 34 investment banks — including Citigroup, Wells Fargo Securities and Bank of New York Mellon — made misleading statements in offering documents for bonds issued from June 2007 to September 2008.

“Lehman’s executives…made materially false statements about its financial condition causing Lehman’s stock and bond prices to be artificially inflated,” the suit stated. “When Lehman’s losses and exposure came to light, the revelations led to severe declines in Lehman’s stock price and ultimately to its bankruptcy. Lehman also had engaged in manipulative quarter-end transactions called ‘REPO 105’ transactions that hid billions of dollars of Lehman’s debt from the public,” the lawsuit asserted, referring to the accounting practice that allegedly allowed Lehman to hide the extent of its use of borrowed money, or leverage.