Australian creditors involved in a class action against collapsed American investment bank Lehman Brothers have reached a conditional settlement of the matter involving hundreds of millions of dollars.
The conditional settlement of the Wingecaribee Shire Council class action paves the way for the liquidators of Lehman Brothers Australia, PPB Advisory, to distribute more than 50 cents in the dollar to various councils and charities.
PPB said on Monday that the distribution would be on top of the $250 million directly received by councils and charities in January 2012 from their Lehman-originated collateralised debt obligations (CDOs).
"We are hopeful of making distributions to all creditors in or around the first quarter of 2014," PPY said in a statement.
"Once the necessary court approvals have been obtained, we are well placed to distribute over $300 million to creditors early next year.
"This will bring total recoveries to more than $550 million, which is an excellent outcome for local creditors caught up in what has been the largest corporate collapse in history."
The conditional settlement will be put to the Federal Court for ratification.
The applications are expected to be heard in December.
Three councils Wingecarribee Shire, Parkes Shire and City of Swan - had sought damages against Lehman Brothers Australia, claiming that they suffered losses arising from the acquisitions of synthetic collateralised debt obligations (SCDOs) and some other complex financial ptoducts.
In a judgment handed down on September 21, 2012, the Federal Court found that Lehman Brothers Australia had breached its fiduciary duties to municipalities, charities and churches by selling them the highly risky SCDOs, which blew up as the global financial crisis began to develop around mid-2007.
The liquidators of Lehman, which collapsed in 2008, subsequently lodged an appeal against that decision.
Litigation funder IMF, which had been funding churches, councils and charities in claims against Lehman negotiated a conditional settlement of the class action and appeal on the basis that creditor claims be submitted to a non-adversarial claims resolution process.
