Patrick Andrade for The New York TimesThe former headquarters of Lehman Brothers in 2008.8:07 p.m. | Updated
More than three years after Lehman Brothers filed for bankruptcy, the estate of the failed Wall Street firm emerged from Chapter 11 protection on Tuesday as a sliver of its former self, devoted to paying off creditors.
What once was one of Wall Street’s biggest investment banks is now essentially a holding company for assets that include vast real estate holdings and an array of securities like derivatives.
All of those will be sold over time to pay an army of creditors, including hedge funds, money managers and corporations, with claims of more than $300 billion. Lehman said in a statement that its first payout, which could exceed $10 billion, would be made on April 17.
Creditors are expected on average to receive well below 50 cents for each dollar of their claims when the payouts are finished.
Enron met a similar fate after its bankruptcy filing. Its estate emerged from Chapter 11 protection in 2004 as a holding company whose assets have been sold to pay claims. Creditors so far have received nearly $22 billion.
When Lehman filed for bankruptcy on Sept. 15, 2008 — the biggest Chapter 11 case in history — the firm set off a chain of events that nearly toppled the worldwide financial system. Short-term debt markets nearly closed for even blue-chip stalwarts like General Electric, and stronger investment banks like Goldman Sachs and Morgan Stanley faced perilous investor desertions.
Governments worldwide were eventually forced to step in with enormous rescue packages for the global financial system.
Under the guidance of the consulting firm Alvarez & Marsal and the law firm Weil, Gotshal & Manges, Lehman has sold many of its assets in bankruptcy. Its core investment banking operation went to Barclays Capital, and its Neuberger Berman money management business has since been spun off.
The estate’s exit from bankruptcy comes after the confirmation of its reorganization plan in late December — a hard-fought move preceded by months of negotiating between Lehman officials and the firm’s many creditors. Under the terms of that plan, creditors will receive about $65 billion.
“We are proud to announce Lehman’s exit from Chapter 11 and entrance into the final stage of this process — distributions to creditors,” John K. Suckow, an Alvarez executive who also serves as Lehman’s chief operating officer, said in a statement.
Yet many obstacles remain. Lehman must sell its array of holdings amid an uncertain market for deal-making. And it still has a number of legal battles to resolve, including a fight with JPMorgan Chase, over what Lehman says was a cash call that helped push the firm into Chapter 11.
Lehman is seeking to compel testimony from Timothy F. Geithner, the Treasury secretary, and his predecessor, Henry M. Paulson Jr., over what they knew about JPMorgan’s collateral demands.
The estate is also fighting with its former partners in Archstone, the apartment giant whose $22 billion takeover in 2007 helped load Lehman with its fatal mountain of debt. Lehman is hoping to take Archstone public instead of letting it be sold to Equity Residential, a company run by the real estate investor Samuel Zell.
Another battle centers on a dispute between Lehman and a Switzerland-based affiliate over intercompany loans and derivatives guarantees. Each side contends that the other owes it more than $14 billion.