Hedge funds may get USD11 billion frozen at Lehman

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Lehman Brothers International (Europe), where more than USD35 billion of hedge fund assets have been frozen since the bank's collapse last September, could return about USD11 billion to fund managers by March if enough firms approve a new plan.

PricewaterhouseCoopers, administrators for bankrupt Lehman's London-based unit, announced on Monday a proposal that would let hedge funds recover their assets held in custody by Lehman Brothers International (Europe), or LBIE. The scheme requires approval by 90 percent of Lehman's clients.

"This agreement has been negotiated over the last six months and will now allow us to return a further USD11 billion or so of trust assets to their rightful owners," Steven Pearson, joint administrator for LBIE and a PricewaterhouseCoopers partner, said in a statement.

Hundreds of hedge funds were left hanging last September when New York-based Lehman filed for bankruptcy. More than USD35 billion of assets that they entrusted to Lehman's London unit have been frozen as part of the receivership process.

The proposal, which will be sent to fund managers Tuesday, would return assets to funds and close out positions without the need to post further collateral. LBIE's creditors' committee supports the plan unanimously.

Clients have until Dec 29 to vote on the plan. PwC hopes to set a deadline for filing claims at the end of February and return assets before the end of March.

The claim resolution agreement follows an earlier attempt by PwC to speed up returns of hedge fund assets that was struck down by British courts. PwC also said the latest plan will address LBIE assets held by Lehman's US affiliate, Lehman Brothers Inc.

PwC has warned that without a court-approved or client-approved plan, it could take many years and even a decade before claims can be reviewed and assets returned to their owners.

So far USD13.3 billion of assets have been returned, while USD11.4 billion of securities and cash have been recovered from various third parties and are available for return

LBIE is also trying to claim USD7.2 billion of cash and assets held by Lehman Brothers affiliates in the United States and Asia.

The LBIE Creditors' Committee is comprised by Ramius Credit Opportunities Master Fund Ltd, GLG European Long/Short Fund, Legal and General Pensions Ltd, Oceanwood Global Opportunities Master Fund and Lehman Brothers Holdings Inc.