A U.S. bankruptcy judge yesterday cleared the way for hedge fund Elliott Management and King Street Capital Management L.P. to buy a multibillion-dollar bankruptcy claim owed to a Lehman Brothers U.K. subsidiary at a discount, the Wall Street Journal reported yesterday. Judge James Peck of the U.S. Bankruptcy Court in New York rejected a bid by a rival group of hedge funds to take a closer look at the deal, the details of which they argued were unfairly kept secret. Those funds, including such major distressed-debt investors as Paulson & Co. and Baupost Group, had argued that rival bidders had been shut out of the sale process. Lehman officially exited bankruptcy last year under a chapter 11 approved by its creditors, including the hedge funds involved in the dispute. Harvey Miller, a lawyer for Lehman’s post-bankruptcy overseers, said at yesterday’s hearing that the sale to Elliott and King Street is not simply a purchase of a claim, but reflects a complex web of claims and litigation involving two Lehman U.K. subsidiaries, which are being wound down under English law. The company’s liquidation is expected to continue for several more years as the team sells off Lehman’s still-considerable real-estate and private-equity holdings and unwinds its derivative positions.
