The London unit of can finally be closed, just over 17 years after the collapse of the North American bank in one of the biggest bankruptcies in history.
A London judge ruled this Wednesday (8) that the judicial administration of Lehman Brothers International Europe (LBIE) can be completed, as the company has satisfied all its creditors. The administration began after the collapse of the US headquarters on September 15, 2008, the beginning of the global financial crisis.
The lawsuit was unexpectedly lucrative: PricewaterhouseCoopers administrators managed to recover almost £28 billion ($37.5 billion) from the international unit — a “remarkably successful” outcome, according to judge Robert Hildyard.
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The liquidation of Lehman’s assets kept a legion of accountants, lawyers and hedge funds busy for nearly two decades. PwC received £1 billion for its work on LBIE, while a further £489 million has been paid in legal fees since 2008, according to the administrators’ latest report.
The amount recovered largely exceeded initial expectations. Most of LBIE’s creditors — pronounced “Libby” — were paid in full, with legal interest of 8% per year under UK rules.
In the UK, receivers are appointed to insolvent companies with the aim of trying to rescue them or extract sufficient assets to pay off debts. Some LBIE subsidiaries are expected to remain in administration for a brief period before they too are liquidated.
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After the collapse, several opportunistic investors bought LBIE debt at deep discounts, including Elliott Management, AB Carval Investors LP and Davidson Kempner Capital.
The abundance of recovered cash led many creditors to sue each other to get paid first, in a series of disputes known as “Waterfall” cases. As of 2023, Deutsche Bank and Lehman’s U.S. parent are still in court discussing lower-priority obligations.
Administrators also took action to try to increase recovered assets. Two and a half years ago, LBIE lost a lawsuit in New York in which it claimed that insurer Assured Guaranty owed it $500 million.
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