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More than 1,000 creditors of the European operations of failed U.S. investment bank Lehman Brothers will share a 3.5 billion pound ($5.5 billion) payout next week, Reuters reported today. The payout means the recovery so far for creditors from one of the banking collapses at the heart of the 2008 financial crisis is 68.5 cents in the dollar. PricewaterhouseCoopers, joint administrators for Lehman Brothers International (Europe), said a dividend of 43.3 percent of what creditors were owed—the second so far—would be paid on June 28. The administrators for what is the biggest bankruptcy in history said in their last progress report in April that unsecured creditors could be paid in full and there could be surplus funds.

Ally Financial Inc.'s proposed $2.1 billion agreement reached last month with creditors of its bankrupt Residential Capital LLC subsidiary cleared a key court deadline with only one vigorous objection, though several warning shots were fired, Reuters reported yesterday. Ally agreed to the settlement last month to end allegations it stripped ResCap of choice assets including the online lender, Ally Bank, before dumping the business into bankruptcy, which left creditors empty-handed. Syncora Guarantee Inc. insured some of the mortgage-backed bonds issued by units of ResCap, which have fallen sharply in value, and it objected for a variety of reasons. Syncora alleged that ResCap did not explain how it decided to split money from the Ally settlement among different bond insurers. The Department of Justice's bankruptcy watchdog, plaintiffs in a class action and government's pension insurer also objected as the deadline passed yesterday. Several parties also let the court know that while they were not formally objecting, they were taking up positions against the yet-to-be-filed reorganization plan. ResCap plans to file a reorganization plan by July 3 that will explain in more detail how creditors will be paid. A hearing has been scheduled for June 26 before Bankruptcy Judge Martin Glenn to approve the Ally settlement plan.

The trustee winding down Lehman Brothers Holdings Inc.'s brokerage struck a deal that will slash $8.5 million in claims from a Curaçao-based unit and said that he has all but completed his goal of making more than 110,000 brokerage customers whole and now is focusing on returning cash to creditors, Dow Jones Daily Bankruptcy Review reported today. Trustee James W. Giddens said in a court filing that the settlement with Lehman Brothers Securities N.V., which sold notes and warrants that raised cash to finance Lehman's parent company and other subsidiaries, would allow the Curaçao unit to redeem a $2.4 million "customer" claim from the brokerage. Previously, the subsidiary had filed a $10.9 million customer claim.

Residential Capital LLC struck a deal with Financial Guaranty Insurance Co. to cut the bond insurer's $5.55 billion claim to $596.5 million, Dow Jones Daily Bankruptcy Review reported today. The settlement filed on Friday brings ResCap, once the fifth-largest mortgage servicer in the country, a step closer to the end of its chapter 11 case, but still requires bankruptcy court approval.

Lehman Brothers' trustee James Giddens said that an initial round of distributions began Friday that should result in institutional customers getting all their money back, Reuters reported on Friday. A settlement announced earlier this year between the brokerage, Lehman's defunct parent company and its European affiliate will provide for full payments for hedge funds, corporate affiliates, counterparties and other customers, Giddens said. Corporate entities with customer claims against Lehman's U.S. broker-dealer have been waiting nearly five years for their money, as Giddens, the trustee tapped to administer the broker's estate, has worked to determine exactly how much money was available to pay them back. The linchpin to quantifying the estate's assets was a deal announced in February under which Giddens allowed Lehman's parent company to assert a $2.3 billion customer claim against the brokerage, and allowed a $9 billion customer claim to Lehman's European unit.

Lehman Brothers Holdings Inc. is selling more of the claims against its defunct brokerage, as part of a continuing strategy to quickly recover money that will go to its creditors, Dow Jones Daily Bankruptcy Review reported today. Lehman said on Friday that it will sell an additional $1.06 billion of its general unsecured claims against the brokerage unit, Lehman Brothers Inc., which is being unwound by trustee James W. Giddens.

Ally Financial Inc., the auto lender majority-owned by the U.S. government, agreed to pay $2.1 billion to avoid lawsuits related to its bankrupt mortgage unit, Residential Capital LLC, Bloomberg News reported yesterday. Under the settlement, Ally will pay $1.95 billion in cash to the ResCap bankruptcy estate, plus $150 million in insurance proceeds, according to a court filing yesterday. The money will be added to the $4.5 billion that ResCap raised by selling its mortgage-servicing business and a loan portfolio and will eventually be distributed to creditors owed at least $6.3 billion under a reorganization plan supported by Detroit-based Ally.

Defunct investment bank Lehman Brothers Holdings Inc. said it has agreed to sell $4.22 billion of its general unsecured claims against its brokerage unit Lehman Brothers Inc. for about $1.88 billion, or 45 percent of face value, the Wall Street Journal's Bankruptcy Beat blog reported yesterday. Earlier this month, Lehman said that it had hired Lazard Inc. as an adviser to explore the monetization of its general unsecured claims against the brokerage unit. The latest agreement comes after a Dutch auction and is contingent on a February settlement agreement between Lehman and James W. Giddens, trustee for the Securities Investor Protection Act liquidation of Lehman Brothers Inc., being effective.

In related news, the law firm of the trustee liquidating the Lehman Brothers Inc. brokerage asked a judge to approve fees and expenses of $37.5 million for the period from July 1 through February 28, Bloomberg News reported yesterday. A bankruptcy judge previously approved $212.7 million in fees and expenses for Giddens and the law firm of Hughes Hubbard & Reed LLP for the four-and-a-half years since September 2008, according to a court filing. Click here for the full article.

Eighty-nine New York landowners who once agreed to let Norse Energy Corp. USA drill for natural gas on their property have filed a lawsuit against the struggling company, arguing that its executives have unfairly extended the life of their lease agreements using a legal clause meant for natural disasters and terrorist attacks, Dow Jones Daily Bankruptcy Review reported today. The landowner group said that Norse Energy USA should not be allowed to use what is called force majeure to extend the life of the leases they signed before former New York Gov. David Paterson banned high-volume hydraulic fracturing, or fracking, while state regulators come up with new permitting rules for the drilling process.

The liquidator for Lehman Brothers Holding Inc.’s Australian unit won federal court approval for a creditors’ vote on a proposed claims settlement giving them up to about half of what they’re owed, Bloomberg News reported yesterday. Creditors will be paid between 33 Australian cents and 49.9 cents for each dollar of debt in the local currency, John Sheahan, a lawyer for PPB Advisory, the liquidator, said at a hearing in federal court in Sydney today. U.S. insurers agreed to pay $45 million and Australian insurers A$3 million ($2.9 million) to fund the settlement, Sheahan said. Litigation funder IMF (Australia) Ltd. previously agreed to drop a class action lawsuit against the firm as part of the settlement.