U.S. claims against Drexel are expected

November 09, 1990|By New York Times News Service

NEW YORK -- Federal savings regulators plan to file claims expected to reach billions of dollars against Drexel Burnham Lambert Inc., former employees and related entities, people with direct knowledge of the plans said yesterday.

The claims are expected to run as high as $5 billion to $10 billion for losses the regulators say were incurred by a number of the nation's largest savings and loans that had invested in high-yield "junk" bonds.

The claims are to be filed by the Federal Deposit Insurance Corp. and the Resolution Trust Corp., which oversee the thrift industry.

Savings institutions invested heavily in junk bonds in the 1980s, and their losses on those risky investments are said to account for a large amount of losses in the S&L debacle.

A number of claims would be filed as part of the bankruptcy proceeding involving Drexel and a number of its related companies.

Drexel, which grew into a Wall Street powerhouse in the 1980s through the efforts of its junk bond division, headed by Michael Milken, filed for protection from its creditors this year.

In a filing with the court, FDIC and RTC lawyers said the agencies expect to make "substantial claims" against Drexel by Nov. 15.

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