Unravelling finances will leave Lehman Brothers creditors waiting years for cash

Creditors of crashed investment bank Lehman Brothers may have to wait years before any of their cash is returned, the firm's administrator warned yesterday.

'This is a gargantuan task,' said Tony Lomas, one of the partners of PricewaterhouseCoopers, the accountancy firm appointed as administrator.

Unravelling the finances of Lehman's European arm will be '10 times as large and more complicated' than dealing with the bankruptcy of Enron, he added.

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'A gargantuan task': Lehamn Brothers creditors may wait years for their money

At a packed meeting of the bank's creditors yesterday, PWC admitted that many of Lehman's clients won't recover all of their cash.

Lomas said: 'Some creditors will lose money, but how much, we can't determine for a significant time.'

The Wall Street firm's labyrinthine web of trades was revealed for the first time yesterday.

Lehman's European arm has around £670billion of trades outstanding with over 7,000 counterparties, PWC said.

It operated through over 200 separate companies across the world, with 36 registered companies in the UK alone.

The £15billion in clients' assets held by Lehman should be returned relatively swiftly. However, Lehman's opaque trades will take much longer to resolve.

The US bank was a big player in the £3.8trillion market for credit default swaps  -  complex insurance policies against companies going bust.

With Lehman itself going under, investors fears the insurance policies they bought from the bank are now worthless.

As they filed into the meeting at London's O2 Arena, creditors filed their claims against the collapsed bank, stretching from the low thousands into the tens of millions.

The collapse of Lehman under a mountain of toxic mortgage assets triggered a period of unparalleled chaos on global financial markets.

The chain events unleashed by its demise led to the nationalisation of US insurance giant AIG and state bailouts of a raft of banks on both sides of the Atlantic.

Its old adversaries on the financial markets have by now picked over the Lehman carcass.

PWC has sold the European operations, based in London, to Japan's Nomura, along with its Asian division. Barclays bought Lehman's North American investment bank, trading arm and Manhattan headquarters for around £1billion.

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