Drexel OKs Panel to Oversee Firm’s Liquidation

Drexel Burnham Lambert Group Inc. won a battle Friday that allows a panel of its outside directors to monitor the winding down of the company instead of turning its books over to a court-appointed investigator.

Drexel and First City Bancorp, the head of its creditors committee, told the bankruptcy court that they had reached an agreement in which a committee of three of Drexel’s outside directors would oversee the liquidation process.

However, the accord also provides for a subcommittee of four creditors who will be told of transactions before they occur.

Although the creditors cannot demand that Drexel stop a sale, they can ask for a delay. If no agreement can be reached, the creditors can appeal to the bankruptcy judge.

In addition to overseeing the liquidation process, the oversight committee of Drexel directors has the authority to investigate compensation of more than $100,000 to anyone who had been an officer or director of Drexel or its subsidiaries since Jan. 1, 1989.

Creditors and government regulators have been concerned about Drexel’s payment of some $270 million worth of bonuses several weeks before it filed for bankruptcy. The Securities and Exchange Commission is currently investigating the payments.

Drexel filed for bankruptcy Feb. 13 but its subsidiaries are not included in the filing. Therefore, they are being liquidated without court supervision.