Citing significant number of objections, Judge Peck adjourns hearing on Lehman's motion to establish procedures for U.S. bankruptcy claims - Teigland-Hunt LLP Client Alert
As noted in our alert of June 14, 2009, Lehman Brothers Holdings Inc. and its affiliated debtors (collectively, the “Debtors”) filed a motion on May 26, 2009 to establish a deadline of August 24, 2009 for filing proof of claim forms in the Debtors’ chapter 11 bankruptcy proceedings (“Bar Date Motion”). In addition the Debtors sought approval of specialized procedures and proof of claim forms for claims related to derivative transactions (the “Proof of Claim”). A wide cross-section of claimants objected to the proposed procedures and Proof of Claim form for derivative claims citing unnecessary and onerous procedural requirements, including the completion of a detailed questionnaire with supporting documentation concerning the evidentiary basis for their claims (“Derivatives Questionnaire”).
On June 23, 2009, the Debtors filed an omnibus reply to the objections. The reply predominantly reiterated their position that the enormity of the claims process under this proceeding is unprecedented and necessitates the Debtors’ request for detailed information in excess of typical chapter 11 cases. Hoping to allay some of the major concerns of the claimants, Lehman modified its original proposed order (“Bar Date Order”) and the Derivatives Questionnaire to clarify, among other things:
(i) trustees may file Proof of Claim forms on behalf of their customers,
(ii) which transactions constitute a “Derivative Contract” subject to the requirements of the Derivatives Questionnaire,
(iii) that while a creditor which submitted a valid claim prior to entry of the Bar Date Order will not have to re-file a Proof of Claim, it will nonetheless be required to submit a Derivatives Questionnaire or Guaranty Questionnaire, as applicable,
(iv) that the information submitted on the Lehman claims website in respect of derivative contracts and guarantees will not be publicly accessible, and
(v) the proposed Bar Date is extended to September 1, 2009, but can be no earlier than 60 days after notice of the Bar Date is mailed, and the deadline for the completion and submission of the Derivatives Questionnaire is extended an additional 30 days beyond the Bar Date.
At the hearing on the motion on June 24, 2009, Judge James Peck noted that the Bar Date Motion has produced more objections than any other single action in the Lehman chapter 11 proceedings thus far. Taking this into consideration, Judge Peck said a further evidentiary hearing is required before he can rule on the revised Bar Date Order to ensure the procedures are fair and represent routine market practices. To this end, a hearing to consider the proposed procedures to close out and value derivatives transactions is scheduled for Monday, June 29, 2009, at 2:00 p.m. at the United States Bankruptcy Court for the Southern District of New York. Judge Peck will be looking to establish evidence on the record regarding (i) the appropriateness of the Debtors proposed procedures and (ii) the potential burdens of such procedures on the creditors.
If you have any further questions regarding the Lehman proceedings, please feel free to contact Lauren Teigland-Hunt at (212) 269-1002 or GuyLaine Charles at (212) 269-1016.