Creditors May Settle Quickly in Drexel Case : Bankruptcy: A tentative pact is reached after the judge pressures key parties. The investment bank’s proceeding may end within months.

Impelled by threats from a tough federal judge, creditors of Drexel Burnham Lambert, which is operating under Chapter 11 bankruptcy protection, reached a tentative agreement Monday that may quickly resolve the bankruptcy case of the once-powerful investment bank.

A Drexel spokesman said the surprise development came after key creditors, including the Federal Deposit Insurance Corp., the Resolution Trust Corp., and others with lawsuits pending against the firm, agreed on a plan for dividing up the firm’s estimated $2.8 billion in assets.

The accord leaves open the possibility that Drexel will emerge from bankruptcy proceedings as a going business, although in a vastly diminished form. Lawyers for Drexel and the various creditors began negotiating Thursday and continued through the holiday weekend. They announced the tentative settlement in federal court in New York on Monday.

Steven Anreder, the Drexel spokesman, said the agreement came after U.S. District Judge Milton Pollack took charge of the case and threatened to liquidate Drexel under Chapter 7 of federal bankruptcy law if the creditors and Drexel’s lawyers failed to reach an accord. The use of Chapter 7 would have resulted in a quick sale of assets and left creditors with relatively little.

“The judge put the parties under a lot of pressure to settle,” Anreder said.

The development comes just over a year after Drexel collapsed into bankruptcy proceedings on Feb. 13, 1990, months after Michael Milken, the former chief of the firm’s Beverly Hills-based junk bond department, was indicted on felony charges and the firm itself had pleaded guilty to six felony counts.

If the agreement is approved by Pollack and overcomes a remaining series of hurdles, the bankruptcy case could be over within a few months. The case involves over 13,000 lawsuits filed against Drexel, with total claims amounting to more than $20 billion, greatly exceeding the firm’s assets. Lawyers involved in the case have said that the case easily could have dragged on for at least five years.

Details of the settlement weren’t made public, and the judge has said he may not release the plan for several days so that lawyers in the case will have time to consult with their clients.

Chapter 11 permits a firm to remain in the hands of its management and continue to operate while it attempts to work out an arrangement with its creditors. Drexel had ceased operations as a securities dealer and underwriter when it began the bankruptcy proceedings. But it remained in existence with a reduced staff and continued to manage the firm’s huge portfolio of junk bonds and other assets.

The tentative accord includes the FDIC, which together with the Resolution Trust Corp., a related government agency, sued Drexel last year for $6.8 billion. The suit charged that illegal Drexel activities contributed to the failure of many savings and loans.

The settlement does not include a $5.2-billion claim filed earlier this month by the Internal Revenue Service.