Drexel Releases Plans to Settle With Creditors : Bankruptcy: The reorganization of the collapsed securities firms would also allow the company to be reborn on Wall Street.

More than 17 months after filing for bankruptcy protection, Drexel Burnham Lambert Inc. on Wednesday released a draft of its plan to pay creditors and establish a second life on Wall Street.

The collapsed securities firm, among the industry’s most powerful in the 1980s, said it gave the “working draft” of its reorganization to the two federal judges handling the case. Drexel said it expects to file the plan formally in court within a week.

The agreement between the firm and its main creditor groups would place most of Drexel’s $2.6 billion in assets into a trust fund that would be owned by creditors and securities litigation claimants.

But before Drexel emerges from bankruptcy, the plan must be approved in a vote of its 17,000 creditors expected later this year. A hearing on objections to the plan is set Aug. 9 before U.S. District Judge Milton Pollack.

Several objections have already been made, including one by former Drexel financier Michael Milken, who is a creditor. Milken is fighting the reorganization plan’s settlement of a lawsuit that blamed him in part for the collapse of dozens of savings and loans.

The plan was able to proceed after Drexel earlier this week said it had agreed to pay $290 million to the Internal Revenue Service to settle a tax claim originally made for $5.28 billion. The dispute had threatened to undermine Drexel’s re-emergence from bankruptcy.

The 80-page draft reorganization released Wednesday, accompanied by a 50-page glossary, specifies how Drexel’s total assets of about $2.6 billion would be divided.

Drexel said the formal filing of the plan was delayed by a disagreement over how much a small group of former stockholders would receive for employment claims against the company.

The reorganization plan would ensure payment of $150 million owed by Drexel to a Securities and Exchange Commission compensation fund set up as part of the firm’s 1989 settlement of civil and criminal securities fraud charges.

Drexel filed for Chapter 11 bankruptcy protection in February, 1990.