(Bloomberg) -- A ruling on once-forgotten subordinated debt issued by Lehman Brothers before its collapse could yield a huge payday for Deutsche Bank AG and other distressed-debt investors. 

Holders of subordinated notes issued out of one of Lehman’s European subsidiaries known as “enhanced capital advantaged preferred securities,” or ECAPS, must be paid before other claims are satisfied, judges in London’s Court of Appeal said in a judgment on Wednesday. The ruling could still be subject to yet another appeal at the U.K. Supreme court.

Deutsche Bank is the largest holders of ECAPS notes, and led part of the appeal. Other holders include Barclays Plc, Farallon Capital Management and CarVal Investors. 

Read more: Lehman Scraps in Dispute as Deutsche Bank Makes Legal Bid

In an earlier court case, a judge ruled that investors should share 13.7% of whatever was left after paying higher-ranking creditors, with the rest going to Lehman Brothers Holdings Inc., or LBHI, the ultimate U.S. parent of the collapsed broker-dealer. Wednesday’s ruling will see ECAPS holders take priority over the LBHI claims.

King Street Capital Management and Elliott Management teamed up with LBHI to form a joint venture called the Wentworth Group that would share claims based on loans that the U.S. parent made to its European subsidiary. King Street is also a large ECAPS holder and will likely receive a share of the pot either through the notes or the LBHI venture.


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