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Lehman’s US brokerage, European unit to settle $38bn in disputed claims

The former Lehman Brothers Holdings’ US brokerage and a European unit have reached a tentative $38bn settlement agreement of asset claims to be distributed among customers and creditors.

Under the deal, creditors of the European arm will receive $12bn in claims against $24bn, while the brokerage will waive its $13.8bn in claims against the former.

The settlement requires approval from the US bankruptcy Judge James Peck in Manhattan and the English High Court, which is likely to be granted in the first quarter of 2013.

James Giddens, bank’s liquidation trustee, told the Financial Times that if approved by the court, the agreement sets the stage for distributions that will provide for 100% recovery of customer property.

"The agreement resolves tens of billions in claims from [Lehman’s] largest single customer claimant and will allow for customer and creditor distributions much sooner than if [the European arm’s] claims involving hundreds of thousands of transactions were litigated," Giddens added.

Lehman Brothers, currently operating as a liquidating company, announced in March 2012 that it will dispose its remaining assets and pay nearly $65bn (£41bn) to creditors and investors from 17 April this year.

Due to huge losses in the US sub-prime mortgage market, Lehman went bankrupt on 15 September 2008, which was widely seen as one of the prime factor of the global financial crisis.