Lehman gets OK to pay insurance

Bankruptcy court will review fees

NEW YORK - Lehman Brothers Holdings Inc., the investment bank that filed the biggest bankruptcy in history, got temporary permission to pay premiums for insurance covering corporate perks including private jets and officer liability.

US Bankruptcy Judge James Peck in Manhattan said yesterday the bankrupt holding company may pay the premiums on an interim basis. A final hearing on whether the collapsed bank may pay the estimated $52 million in premiums is set for Nov. 5.

"Does the debtor internally track the flow of cash to the extent that if we need, in the future, to trace where money went?" Peck said, voicing concern over whether the bankrupt firm was keeping accurate records. Lehman lawyer Shai Waisman said that is "absolutely the case" and that a "cash management order" will be submitted soon.

Lehman, which filed for bankruptcy Sept. 15 after failing to find a buyer, paid annual insurance premiums of $11.8 million for directors and officers' liability insurance and $2.7 million for terrorism coverage, according to court papers.

The bank had a policy from AIG Aviation insuring two private jets, one for as much as $34.2 million and another for as much as $38.8 million, along with a Sikorsky helicopter, for as much as $8.8 million.

Lehman's request had been challenged in court by an ad hoc group of bondholders opposing payment of the premiums.

Separately, Peck denied a request from the bondholder group for access to Lehman financial information currently available to the official creditors committee.

The members of the ad hoc committee hold about $10.3 billion in senior notes and $2.3 billion in subordinate notes. The group has said in court papers that it wants information related to the sale of New York-based Lehman's North American business to London-based Barclays Plc.

Peck said the group should be able to get access to the information that it needs from the creditors committee.

"The official creditors committee is the custodian of all creditors' interest," Peck said, adding that the committee should serve as a "watchdog" for other creditors.

Peck later ordered lawyers for Lehman to provide more transparency about what was going on in the case.