On May 26, 2009, Lehman Brothers Holdings Inc. and its affiliated U.S. chapter 11 debtors (“Lehman” or the “U.S. Debtors”) filed a motion (“Motion”) requesting the U.S. Bankruptcy Court (“Bankruptcy Court”) to set August 24, 2009 at 5:00 p.m. (ET) as the deadline for filing proofs of claim against the U.S. Debtors (the “Bar Date”). The Motion1 seeks entry of a proposed order (“Proposed Order”), that (i) establishes the Bar Date; (ii) approves the Proof of Claim Form; and (iii) approves the proposed notice procedures and form for the Bar Date notices. Objections to the Motion must be received by the Bankruptcy Court no later than June 12, 2009 at 12:00 p.m. (ET). Otherwise, the Proposed Order will be presented for signature by the Bankruptcy Court at 4:00 p.m. on that same day. If objections are filed, a hearing will be held on June 17, 2009.
Who Must File?
Typically, a creditor must file a Proof of Claim if (i) the Debtor did not list the creditor’s claim in the Debtor’s schedules of assets and liabilities (the “Schedules”); (ii) the creditor determines that the Debtor did not list the creditor’s claim correctly in the Debtors’ Schedules or (iii) the claim is listed on the Schedules as disputed, contingent or unliquidated. Pursuant to the Proposed Order, creditors that do not fall into one of the above categories would not need to file a Proof of Claim. Nevertheless, it is generally recommended that a creditor file a Proof of Claim even when the Schedules correctly list that creditor’s claim because Schedules are routinely amended. A creditor that has not filed a Proof of Claim would have to scrutinize each amended Schedule to ensure the amendment does not affect its claim as any amendment to the Schedules is typically binding unless the creditor objects thereto.
The Proposed Order provides that each Proof of Claim must: (i) be written in English; (ii) be denominated in U.S. dollars; (iii) conform substantially with the Proof of Claim Form2; (iv) state the name and case number of the specific Debtor against which it is filed; (v) describe with specificity the legal and factual basis for the alleged claim; (vi) include appropriate supporting documentation; and (vii) be signed by the claimant or its authorized agent.
Lehman has requested the Bankruptcy Court to explicitly provide that (x) third parties are not permitted to assert claims on behalf of another party, and that claims asserted by persons other than those legally entitled and authorized to assert such claim shall be disallowed, (y) Proofs of Claim sent by facsimile, telecopy or electronic mail transmission will not be accepted, and (z) to be timely filed, a Proof of Claim must be actually received by Epiq or the Bankruptcy Court on or before the Bar Date in accordance with the requirements set forth in the Proposed Order.
In addition, the Proposed Order further provides that any holder of a claim arising from the rejection of an executory contract or unexpired lease must file a Proof of Claim based on such rejection by the later of (i) the Bar Date and (ii) the date that is forty-five (45) days following the effective date of such rejection or be forever barred from doing so.
Additional Requirements for Claims Based on Derivative Contracts and Guarantee Claims
A. Claims Based on Derivative Contracts
To enable Lehman to efficiently evaluate the accuracy and validity of claims based on Derivative Contracts and reduce the administrative burden associated with the claims submission process, Lehman seeks to require holders of such claims to complete a Derivative Questionnaire3 and upload detailed supporting documentation to http://www.lehman-claims.com (the “Lehman Database”).
The comprehensive and detailed nature of the Derivative Questionnaire indicates that Lehman will carefully scrutinize each Derivative Contract and the steps taken by Lehman’s counterparties postbankruptcy so as to determine, among other things, the effectiveness of termination, the accuracy and validity of damage calculations and the applicability and validity of set-off rights.
For claims based on a guarantee related to a Derivative Contract, holders of such claims will be required to complete a Guarantee Questionnaire4 (see below) in addition to the Derivative Questionnaire.
B. Claims Based on a Guarantee
Similarly, in order to reduce the administrative burden of reconciling claims filed against multiple debtors based on obligations primarily incurred by one Lehman entity and guaranteed by a different Lehman entity, Lehman seeks to require holders of guarantee claims against Lehman to complete a Guarantee Questionnaire and upload supporting documentation to the Lehman Database.
C. Proof of Claims Filed on or Prior to the Entry of the Proposed Order
It is significant to note that any creditor that has filed a proof of claim on account of (i) guarantees, (ii) derivative contracts, or (iii) guarantees relating to derivatives contracts on or prior to the entry of the Proposed Order will be required (pursuant to the Proposed Order) to amend the proof of claim previously filed to conform to the filing requirements and procedures outlined above.
Failure to File a Claim
Any claimant who is required to file a Proof of Claim, including completing the Derivative Questionnaire or Guarantee Questionnaire (as applicable) and uploading required information to the Lehman Database, but fails to do so in compliance with the Proposed Order on or before the Bar Date shall be precluded from asserting such claim against the U.S. Debtors, which will result in the complete disallowance of such claim. Moreover, such claimants shall also not be permitted to vote to accept or reject any plan of reorganization or liquidation filed in the U.S. chapter 11 cases, participate in any distribution on account of such claim, or receive further notices regarding such claim.
Objections to the Motion
Objections to the Motion must be received by June 12, 2009 at 12:00 p.m. (ET). Otherwise, the Proposed Order will be presented to Bankruptcy Judge James Peck for his signature on that same day at 4:00 p.m. (ET). If a written objection is timely filed and served, a hearing will be held on June 17, 2009 at 2:00 p.m. (ET).
The U.S. Debtors have been advised by their court-approved claims agent, Epiq Bankruptcy Solutions, LLC (“Epiq”), that Epiq will be ready to mail the Proof of Claim Form and the Bar Date notice within five business days of entry of the Proposed Order. Therefore, if such relief is granted and an order is entered by the Bankruptcy Court on June 17, 2009, Epiq will be able to complete the mailing of the Bar Date notice and the Proof of Claim Forms by June 24, 2009.
If the Proposed Order is adopted by the Bankruptcy Court in the coming weeks, holders of claims will have approximately two months to prepare and file their Proofs of Claim. Preparing claims can prove time consuming, particularly with respect to completing the Derivative Questionnaire and Guarantee Questionnaire.We therefore recommend that claimants now initiate the process of gathering relevant information, determining claim amounts and reviewing the applicable Questionnaire(s). While claimants do not have to retain counsel to file a claim, if a claimant intends to engage counsel to assist in the preparation and filing of a claim, we recommend they do so promptly given the high volume of claims expected to be filed before the Bar Date.