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Lehman brokerage trustee eyes $18.3 billion payout

File photo of Lehman Brothers booth on the trading floor of the New York Stock Exchange
File photo of Lehman Brothers booth on the trading floor of the New York Stock Exchange

By Jonathan Stempel

(Reuters) - The trustee liquidating Lehman Brothers Holdings Inc's brokerage unit asked a bankruptcy judge for permission to set aside $18.3 billion of assets to be returned to customers beginning early next year.

That payout would represent more than three-fourths of the $23.7 billion of assets that James Giddens, the trustee for the Lehman Brothers Inc unit, said he has under his control.

Of the $23.7 billion, $12.7 billion are securities and $11 billion is cash. Lehman was the fourth-largest U.S. investment bank prior to its September 15, 2008 bankruptcy, the largest Chapter 11 filing in U.S. history.

"The great bulk of the assets that will be available for distribution ... are now in hand," Giddens said in a late Thursday filing with the U.S. Bankruptcy Court in Manhattan. "The trustee would like to be in a position to proceed with interim distributions to customers in early 2012."

Soon after Lehman's bankruptcy, Giddens distributed $92.3 billion to benefit customers holding 110,000 accounts. Many accounts were absorbed by Barclays Plc and asset manager Neuberger Berman.

Giddens is also liquidating the broker-dealer unit of MF Global Holdings Ltd, a futures brokerage once run by former New Jersey governor and Goldman Sachs chief Jon Corzine. Customer distributions in that case are a small fraction of those in Lehman's bankruptcy.

According to Thursday's filing, Giddens plans to keep $3.07 billion of assets in reserve pending the outcome of litigation with Barclays. The British bank bought much of Lehman's investment banking business.

Giddens' request requires approval by U.S. Bankruptcy Judge James Peck. A hearing is scheduled for January 25, 2012.

Peck is also expected at a December 6 hearing to approve Lehman's reorganization plan. The plan would return about $65 billion to creditors starting early next year. Lehman this week said that plan has overwhelming creditor support.

The case is Securities Investor Protection Corp v. Lehman Brothers Inc. U.S. Bankruptcy Court, Southern District of New York, No. 08-01420.

(Reporting by Jonathan Stempel in New York; Editing by Steve Orlofsky)