By Dow Jones Business News,
January 29, 2014, 12:18:00 PM EDT
By Joseph Checkler
NEW YORK--Judge James Peck approved Lehman Brothers Holdings Inc.'s settlement with Fannie Mae over $18.9 billion
in mortgage claims, one last major decision as Lehman's bankruptcy judge before his retirement at the end of the week.
"I want to thank all of you, including those not in the room, for making this experience of a lifetime," a teary-
eyed Judge Peck said before concluding the hearing.
A lawyer for Weil Gotshal & Manges LLP, Lehman's bankruptcy counsel since Lehman's 2008 collapse, began the hearing
thanking Judge Peck for his "hard work, scholarship and practicality.
"We'll miss you, and we wish you luck in your future endeavors," said the lawyer, Jacqueline Marcus. "Thank you
very much," Judge Peck said.
The judge said in December that he would retire at the end of this month. Aside from his work on Lehman and other
cases, he has served as a mediator in several large cases, including the creditors' settlement with Ally Financial Inc.
in Residential Capital LLC's Chapter 11 case.
Lawyer after lawyer thanked and congratulated the judge for his service, and the morning had moments of levity.
Quintin F. Lindsmith, who represents Nationwide Life Insurance Co., on another matter, touted Judge Peck's "astounding
legacy" even though his motions in the case have been denied.
"You're still going to lose today, you know that," Judge Peck said, to courtroom laughter. After the laughter died
down, Mr. Lindsmith said, "I've never been laughed at before."
Judge Shelley C. Chapman, who will take over the Lehman case, sat in the back of the courtroom Wednesday with one
of her clerks, laughing at a few of Judge Peck's quips.
His last major approval, over mortgage loans and mortgage-backed securities Lehman sold Fannie in the years before
the financial crisis, was apropos considering the housing industry's contribution to Lehman's demise. No one objected to
Fannie Mae, which originally said it was owed $18.9 billion, will receive a general unsecured claim of $2.15
billion against Lehman. Under Lehman's Chapter 11 payment plan, that works out to a recovery of about 25 cents on the
dollar, or about $537.5 million.
In return, Lehman resolves its long-running dispute with the housing giant, which had argued Lehman was on the hook
for the risky loans and frees up $5 billion for creditors. Judge Peck had ordered Lehman to set that amount aside
pending the outcome of the Fannie dispute when he approved the bank's Chapter 11 plan two years ago.
"This will conclude our relationship with Fannie Mae," said Weil's Alfredo Perez, another Lehman lawyer.
Lehman collapsed into the largest bankruptcy ever in September 2008, a breaking point that accelerated the
financial crisis. Under Judge Peck's purview, those in charge of the holding company and its brokerage have sorted out
tens of thousands of claims, hundreds of disagreements and the concerns of dozens of classes of creditors. Since Judge
Peck approved Lehman's liquidation plan in December 2011, those creditors have received more than $60 billion in
distributions, with more to come.
The case won't disappear from bankruptcy court quickly, though. Lehman has a new board of directors and billions of
dollars in assets to manage and sell, much of it real estate.
Judge Chapman will be the one to deal with Lehman's remaining issues, including any asset sales, claims disputes
Write to Joseph Checkler at email@example.com
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