Creditors of the European arm of U.S. investment bank Lehman Brothers may eventually be repaid in full, administrators dealing with the biggest bankruptcy in history said on Monday.
A string of legal wins against other defunct Lehman units has freed up billion of dollars that can now be distributed to former clients of the bank's European arm, PricewaterhouseCoopers (PwC) said in its ninth progress report to creditors.
"The developments we have had over the last six months have been pretty significant," Tony Lomas, lead administrator and partner at PwC, told Reuters.
Overall, Lehman Brothers International Europe owes around 35 billion pounds ($53.8 billion)to thousands of creditors, including hedge funds and banks. Some 14.2 billion pounds of that is owed to unsecured creditors, usually among the last to be paid in any wind-down.
Lomas said it would be years before the unsecured creditors got all their money back.
"It could be three, four, five years down the track or even more. It depends if we have ongoing litigation," he said.
The collapse of Lehman Brothers in 2008 plunged the global financial system into chaos. Its European arm, headquartered in London, was the largest and most complex part of the group because it was a hub for trading and investments.
Some 13.6 billion pounds worth of assets, including securities such as shares and bonds, have been returned to former clients of the European unit of Lehman Brothers since PwC started winding it down.
A further $9.1 billion should be paid out later this year.
PwC has so far earned fees of around 600 million pounds.
Earlier this year, LBIE won a claim against a U.S. arm of the bank and reached settlements with units in Luxembourg and Switzerland freeing up more money for unsecured creditors.
"When you do the maths behind those settlements, they were significant enough that they tip the balance," said Lomas.
In November 2012, a first interim dividend of 25.2 percent was paid to unsecured creditors.
Another distribution of around 2 billion pounds -- equivalent to about 20 pence in the pound -- will be made before the summer, according to Lomas.
Further payments would be made in the coming years and, depending on the outcome of litigation, there was a chance the administration could end up with a surplus.
It is not clear who would get the proceeds of any surplus due to legal cases with LBIE's two main shareholders.
Defaulted claims against LBIE are now trading at over 120 percent of face value in the secondary market, reflecting investors' belief that the administrators will generate a surplus.
Lomas, who has previously worked on the bankruptcies of MG Rover and the European arm of U.S. energy firm Enron, said the Lehman case would easily see him through to retirement, probably in four years' time.
"It will keep me occupied one way or the other until I retire but it will carry on beyond my retirement, that is for sure," said the 56-year-old. ($1 = 0.6507 British pounds)
(Editing by Mark Trevelyan)