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council set to recover over $1m

Tuesday, 16th April, 2013

By Kurtis J Eichler

Broken Hill City Council is likely to recover half of the $2.35 million it lost investing in defunct US investment bank Lehman Brothers.

Liquidators of Lehman Bros Australia estimate creditors - including local councils, charities, churches and private investors - could share in a $211 million pay out if the Federal Court approves the plan.

Litigation funder IMF says the deal could see investors get back between 40 and 49 cents per dollar.

Grange Securities advised City Council to buy the investments before Lehman Bros collapsed in 2008.

Council's investments in the global financial services firm made up half its portfolio.

It managed to recover some funds by simply holding onto them until they matured.

The Federal Court in September ruled Lehman Brothers was liable for $248 million in losses that 72 groups incurred through the bank's misleading and deceptive conduct.

In a statement yesterday, interim GM Greg Wright said City Council had been made aware of the proposal over the last couple of days.

"Council continues to work to maximise the amount to be recovered and has recently had some of the outstanding CDO obligations returned in full," Mr Wright said.

"Until such time as the creditors and the court arrive at a position, it would be inappropriate to comment further," Mr Wright said.

The liquidators' plan has been drafted in consultation with all major stakeholders, including IMF, on behalf of members of the class action.

It includes payment of $US45 million ($A43.05 million) by US professional indemnity insurers to Lehman to distribute among its creditors.

It also allows for the establishment of a claims resolution process and a liquidators' statement on Lehman Brothers' assets and liability.

The Federal Court will have to give approval for a meeting of creditors to take place so a vote can be taken on the plan.

If the plan is approved, the liquidators would return to the Federal Court for its final approval.

The matter returns to the Federal Court on May 7. - BDT/AAP

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